IRS Form 941 Worksheet 1 for 2023

All you need to know about Form 941 Worksheet 1

Updated on March 17, 2023 - 10:30 AM by Admin, TaxBandits

Employers who file Form 941, Employer's QUARTERLY Federal Tax Return, must file the revised form with COVID-19 changes from Quarter 2 of 2020. Now, IRS has revised the Form 941 for Q2 2021, which the filers must use for the second quarter of 2021.

To help business owners calculate the tax credits they are eligible for, the IRS has created Worksheet 1. It is a great tool for completing Form 941 for each quarter.

Table of Content:

1. What are the new changes in Form 941 Worksheets for 2023?

The IRS has updated the first step of Worksheet 1 and reintroduced Worksheet 2. These changes are based on Form 8974 changes for the first quarter of 2023.

Worksheet 1: Step 1

  • Line 1a - Enter the amount from Form 941, Part 1, line 11a (credit from Form 8974).

Worksheet 2: Step 1

  • Line 1g - Enter the amount from Form 8974, line 16, for this quarter.

  • Line 1h - Employer share of Medicare tax remaining. Subtract line 1g from line 1f.

2. What is IRS Form 941 Worksheet 1?

Form 941 Worksheet 1 is used to credit for Qualified Sick and Family Leave Wages for leave taken Before April 1, 2021. This worksheet is broken up into two steps:

  • Step 1 - Determine the employer share of social security tax which is reduced after the credit claimed on Form 8974 and any credit to be claimed on Form 5884-C and Form 5884-D
  • Step 2 - Figure the Refundable and Nonrefundable portions of sick and family leave credit for leave taken before April 1, 2021

Note: Step 3 which was used to calculate the employee retention credit is now calculated in a separate worksheet 4 for Q3 2021, which was previously calculated on Worksheet 2.

3. Who should use Form 941 Worksheet 1?

Any employer who files the Quarterly Employment Tax Form to the IRS and is eligible for credits under CARES Act potentially use this Worksheet. However, business owners who have claimed refundable tax credits due to COVID-19 should use this worksheet. Worksheet 1 applies to the following COVID-19 related tax credit:

  • The sick leave credit
  • The family leave credit

This worksheet will ultimately help you determine tax credits that are either refundable or non-refundable. Get started with TaxBandits today!

4. 2021 Form 941 Worksheet 1 Step-by-Step Instructions

Step 1 of Form 941 Worksheet 1

Step 1 of Form 941 Worksheet 1

Step 1 of Form 941 Worksheet 1

Purpose: Step 1 of Worksheet 1 helps the employer determine their share of social security tax for the quarter after any reductions from credits claimed on Form 8974, Form 5884-C, and/or Form 5884-D. This is still the purpose of Worksheet 1 for the second quarter of 2021.

  • Line 1a

    Enter the amount of social security tax from Form 941, Part 1, line 5a, column 2.

  • Line 1b

    Enter the amount of social security tax from Form 941, Part 1, line 5b, column 2.

  • Line 1c

    Add lines 1a and 1b.

  • Line 1d

    Multiply line 1c by 50% (0.50).

  • Line 1e

    If you’re a third-party payer of sick pay that isn't an agent and you're claiming credits for amounts paid to your employees, enter the employer share of social security tax included on Form 941, Part 1, line 8 (enter as a positive number) .

  • Line 1f

    Subtract line 1e from line 1d.

  • Line 1g

    If you received a Section 3121(q) Notice and Demand during the quarter, enter the amount of the employer share of social security tax from the notice .

  • Line 1h

    If you received a Section 3121(q) Notice and Demand during the quarter, enter the amount of the employer share of social security tax from the notice .

  • Line 1i

    Enter the amount from Form 941, Part 1, line 11a (credit from Form 8974).

  • Line 1j

    Enter the amount to be claimed on Form 5884-C, line 11, for this quarter.

  • Line 1j(i)

    Enter the amount to be claimed on Form 5884-D, line 12, for this quarter.

  • Line 1k

    Total nonrefundable credits already used against the employer share of social security tax. Add lines 1i, 1j, and 1j(i).

  • Line 1l

    Employer share of social security tax remaining. Subtract line 1k from line 1h.

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Step 2 of Form 941 Worksheet 1

Step 2 of Form 941 Worksheet 1

Step 2 of Form 941 Worksheet 1

Purpose: Step 2 of the Worksheet 1 helps employers calculate the sick and family leave credit.

  • Line 2a

    Qualified sick leave wages reported on Form 941, Part 1, line 5a(i), column 1.

  • Line 2a(i)

    Qualified sick leave wages included on Form 941, Part 1, line 5c, but not included on Form 941, Part 1, line 5a(i), column 1, because the wages reported on that line were limited by the social security wage base.

  • Line 2a(ii)

    Total qualified sick leave wages. Add lines 2a and 2a(i).

  • Line 2a(iii)

    Line 2a(ii) for quarter 1 references IRS section 3121(b), but line 2a(ii) references IRS section 3121(b)(1)-(22).

2021 Q2 Form 941 Worksheet 1 2021 Q1 Form 941 Worksheet 1
Qualified sick leave wages excluded from the definition of employment under
sections 3121(b)(1)–(22). 		Qualified sick leave wages excluded from the definition of employment under section 3121(b).

  • Line 2b

    Qualified health plan expenses allocable to qualified sick leave wages (Form 941, Part 3, line 19).

  • Line 2c

    Employer share of Medicare tax on qualified sick leave wages. Multiply line 2a(ii) by 1.45% (0.0145).

  • Line 2d

    Credit for qualified sick leave wages. Add lines 2a(ii), 2a(iii), 2b, and 2c.

  • Line 2e

    Qualified family leave wages reported on Form 941, Part 1, line 5a(ii), column 1.

  • Line 2e(i)

    Qualified family leave wages included on Form 941, Part 1, line 5c, but not included on Form 941, Part 1, line 5a(ii), column 1, because the wages reported on that line were limited by the social security wage base.

  • Line 2e(ii)

    Total qualified family leave wages. Add lines 2e and 2e(i).

  • Line 2e(iii)

    Line 2e(iii) for quarter 1 references IRS section 3121(b), but line 2e(iii) references
    IRS section 3121(b)(1)-(22).

2021 Q2 Form 941 Worksheet 1 2021 Q1 Form 941 Worksheet 1
Qualified family leave wages excluded from the definition of employment under
sections 3121(b)(1)–(22). 		Qualified family leave wages excluded from the definition of employment under section 3121(b).

  • Line 2f

    Qualified health plan expenses allocable to qualified family leave wages (Form 941, Part 3, line 20).

  • Line 2g

    Employer share of Medicare tax on qualified family leave wages. Multiply line 2e(ii) by 1.45% (0.0145).

  • Line 2h

    Credit for qualified family leave wages. Add lines 2e(ii), 2e(iii), 2f, and 2g.

  • Line 2i

    Credit for qualified sick and family leave wages. Add lines 2d and 2h.

  • Line 2j

    For the second quarter of 2021, only enter the wages for paid leave taken before April 1, 2021.

2021 Q2 Form 941 Worksheet 1 2021 Q1 Form 941 Worksheet 1
Nonrefundable portion of credit for qualified sick and family leave wages for leave taken before April 1, 2021. Enter the smaller of line 1l or line 2i. Enter this amount on Form 941, Part 1, line 11b. Nonrefundable portion of credit for qualified sick and family leave wages. Enter the smaller of line 1l or line 2i. Enter this amount on Form 941, Part 1, line 11b.

  • Line 2k

    For the second quarter of 2021, only enter the wages for paid leave taken before April 1, 2021.

2021 Q2 Form 941 Worksheet 1 2021 Q1 Form 941 Worksheet 1
Refundable portion of credit for qualified sick and family leave wages for leave taken before April 1, 2021. Subtract line 2j from line 2i and enter this amount on Form 941, Part 1, line 13c. Refundable portion of credit for qualified sick and family leave wages. Subtract line 2j from line 2i and enter this amount on Form 941, Part 1, line 13c.

It is important to note that step 3 has been removed from Worksheet 1 for the second quarter, unlike with the qualified sick and family leave wages, the employee retention credit is not calculated separately for wages paid before and after April 1, 2021.

The employee retention credit has its own separate worksheet, 941 Worksheet 4 for Quarter 3 and 4 2021. This worksheet is used by employers for the third and fourth quarter of 2021. This worksheet pertains to qualified wages paid after March 31 2021. This was calculated in Worksheet 2 for the second quarter.

5. Step by Step Instructions for 941 Worksheet 3 for 2021

Worksheet 3 for Q3 2021 should be used to calculate credits for qualified sick and family leave wages taken after April 1, 2021. This worksheet contains two steps.

Step 1 of the worksheet 3 helps the employer determine their share of
Medicare taxes.

Form 941 Worksheet 3 2021 Step 1

Form 941 Worksheet 3 2021 Step 1

  • Line 1a

    Enter the amount of social security tax from Form 941, Part 1, line 5a, column 2

  • Line 1b

    Multiply line 1a by 50% (.50)

  • Line 1c

    If you’re third-party payer of sick pay that isn’t an agent and you’re claiming credits for amounts paid to your employees, enter the employer share of Medicare tax included on Form 941, Part 1, line 8 (enter as a positive number)

  • Line 1d

    Subtract line 1c from line 1b

  • Line 1e

    If you received a Section 3121(q) Notice and Demand during the quarter, enter the amount of the employer share of Medicare tax from the notice

  • Line 1f

    Employer share of Medicare tax. Add lines 1d and 1e

Step 2 helps the employer determine the sick and family credit for leave taken after April 1, 2021.

Form 941 Worksheet 3 2021 Step 2

Form 941 Worksheet 3 2021 Step 2

  • Line 2a

    Qualified sick leave wages for leave taken after March 31, 2021 (Form 941, Part 3, line 23).

  • Line 2b

    Qualified health plan expenses allocable to qualified sick leave wages for leave taken after March 31, 2021 (Form 941, Part 3, line 24).

  • Line 2c

    Amounts under certain collectively bargained agreements allocable to qualified sick leave for leave taken after March 31, 2021 (Form 941, Part 3, line 25).

  • Line 2d

    Employer share of social security tax on qualified sick leave wages. Multiple line 2a by 6.2% (0.062).

  • Line 2e

    Employer share of Medicare tax on qualified sick leave wages. Multiply line 2a by 1.45% (0.0145).

  • Line 2f

    Credit for qualified sick leave wages. Add lines 2a, 2b, 2c, 2d, and 2e.

  • Line 2g

    Qualified family leave wages for leave taken after March 31, 2021 (Form 941, Part 3, line 26).

  • Line 2h

    Qualified health plan expenses allocable to qualified family leave wages for leave taken after March 31, 2021 (Form 941, Part 3, line 27).

  • Line 2i

    Amounts under certain collectively bargained agreements allocable to qualified family leave for leave taken after March 31, 2021 (Form 941, Part 3, line 28).

  • Line 2j

    Employer share of social security tax on qualified family leave wages. Multiple line 2g by 6.2% (0.062).

  • Line 2k

    Employer share of Medicare tax on qualified family leave wages. Multiply line 2g by 1.45% (0.0145).

  • Line 2l

    Credit for qualified family leave wages. Add lines 2g, 2h, 2i, 2j, and 2k.

  • Line 2m

    Credit for qualified sick and family leave wages. Add lines 2f and 2l.

  • Line 2n

    For second quarter of 2021 only, enter any employee retention credit claimed under section 2301 of the CARES Act (from Worksheet 2, line 2d) with respect to any wages taken into account for the credit for qualified sick and family leave wages for the quarter.

  • Line 2o

    Enter any credit claimed under section 41 for increasing research activities with respect to any wages taken into account for the credit for qualified sick and family leave wages.

  • Line 2p

    Add lines 2n and 2o.

  • Line 2q

    Credit for qualified sick and family leave wages after adjusting for other credits. Subtract line 2p from line 2m.

  • Line 2r

    Nonrefundable portion of credit for qualified sick and family leave wages for leave taken after March 31, 2021. Enter the smaller of line 1f or line 2q. Enter this amount on Form 941, Part 1, line 11d.

  • Line 2s

    Refundable portion of credit for qualified sick and family leave wages for leave taken after March 31, 2021. Subtract line 2r from line 2q and enter this amount on Form 941, Part 1, line 13e.

6. Step by Step Instructions for 941 Worksheet 5 for 2021

Worksheet 5 for 2021 was created to help employers calculate the COBRA premium assistance credit. This is a new credit introduced by the American Rescue Plan, it’s purpose is to cover the cost of COBRA for employees who have been involuntarily terminated or had their hours reduced below full-time due to the pandemic. There are two steps.

In Step 1, employers calculate their share of Medicare tax

Form 941 Worksheet 5 for 2021 Step 1

Form 941 Worksheet 5 for 2021 Step 1

  • Line 1a

    If you completed Worksheet 3 or Worksheet 4, enter the amount listed on Worksheet 3, line1f, or Worksheet 4, line 1a or 1g (as applicable) If you’re not claiming any of these credits for this quarter, continue by completing lines 1b-1g below and then go to step 2.

  • Line 1b

    Enter the amount of Medicare tax from Form 941, Part 1, line 5c, column 2.

  • Line 1c

    Multiply line 1b by 50% (0.50).

  • Line 1d

    If you’re a third-party payer of sick pay that isn't an agent and you're claiming credits for amounts paid to your employees, enter the employer share of Medicare tax included on Form 941, Part 1, line 8 (enter as a positive number).

  • Line 1e

    Subtract line 1d from line 1c.

  • Line 1f

    If you received a Section 3121(q) Notice and Demand during the quarter, enter the amount of the employer share of Medicare tax from the notice.

  • Line 1g

    Employer share of Medicare tax. Add lines 1e and 1f.

Step 2 helps employers calculate the COBRA premium assistance credit

Form 941 Worksheet 5 for 2021 Step 2

Form 941 Worksheet 5 for 2021 Step 2

  • Line 2a

    Enter the COBRA premium assistance that you provided this quarter.

  • Line 2b

    Enter the amount of the employer share of Medicare tax from Step 1, line 1a, or, if applicable, Step 1, line 1g.

  • Line 2c

    Enter any amount of the nonrefundable portion of the credit for qualified sick and family leave wages for leave taken after March 31, 2021, from Worksheet 3, Step 2, line 2r.

  • Line 2d

    Enter any amount of the nonrefundable portion of the employee retention credit from Worksheet 4, Step 2, line 2h.

  • Line 2e

    Other nonrefundable credits used against the employer share of Medicare tax. Add lines 2c and 2d.

  • Line 2f

    Subtract line 2e from line 2b.

  • Line 2g

    Nonrefundable portion of the COBRA premium assistance credit. Enter the smaller of line 2a or line 2f. Enter this amount on Form 941, Part 1, line 11e.

  • Line 2h

    Refundable portion of the COBRA premium assistance credit. Subtract line 2g from line 2a and enter this amount on Form 941, Part 1, line 13f.

  • Employers who have paid qualified sick and family during the quarter for leave taken before April 1, 2021, should complete both step 1 and step 2.
  • Employers that also paid qualified wages for the employee retention credit will no longer calculate the refundable and nonrefundable portions of the employee retention credit using Worksheet 1. These employers should complete Worksheet 2 for the second quarter of 2021.
  • Employers who paid qualified sick and family leave on wages for leave taken after March 31, 2021 should also complete Worksheet 3. Both steps of Worksheet 3 should be completed.
  • Worksheet 4 is not needed by any employer for the second quarter of 2021. This is only meant to be completed for the third and fourth quarters of 2021 and should only be completed if wages that qualify for the employee retention credit were paid after June 30, 2021.
  • Worksheet 5 should be completed by any employer that provided COBRA premium assistance during the quarter, both step 1 and step 2 should be completed.

For example, ABC consulting company paid qualified sick and family leave wages before and after April 1, 2021, paid wages that qualified for the employee retention credit, and provided COBRA premium assistance during the quarter. This means they should complete Worksheet 1, Worksheet 2, Worksheet 3, and Worksheet 5.

7. How to e-File Form 941 using Worksheet 1 with TaxBandits?

When it comes to filing Form 941 for the 2022 tax year, TaxBandits is here to help! Our filing process includes all the updates to Form 941 for the third quarter and all the worksheets you need to calculate your refundable and nonrefundable credits.

Start e-filing Form 941 with TaxBandits and get your filings done easily.

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