Form 941 Worksheet for 2020 with
IRS COVID-19 changes

All you need to know about Form 941 Worksheet 1, 2020

Updated on October 15, 2020 - 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. The IRS released the draft version of Form 941 in April with the COVID-19 related changes, and the final version was released in June. The changes include some tax relaxation to benefit businesses during this pandemic. Form 941 filers must use the new form from the second quarter of 2020.

To help business owners calculate the tax credits they are eligible for, the IRS has created Worksheet 1. This worksheet does not have to be attached to Form 941. However, it is a great tool for completing Form 941 for each quarter.

Table of Content:

1. What is IRS Form 941 Worksheet 1?

Form 941 Worksheet 1 is used to calculate Refundable and Nonrefundable portions of qualified sick, family leave employee retention credits this quarter. This worksheet is broken up into three steps:

  • Step 1 - Determine the employer share of social security tax
  • Step 2 - Figure the Refundable and Nonrefundable portions of sick and family leave credit
  • Step 3 - Figure the Refundable and Nonrefundable portions of employee retention credit

2. 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 and Employees Retention Credit should 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
  • The employee retention credit

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

3. Form 941 Worksheet 1 Step-by-Step Instructions

As mentioned earlier in the article, this worksheet has three steps. You must first know how you paid your employees during the quarter. Then, you will then need to fill out the sections of the worksheet to calculate the refundable and non-refundable portions of tax credits.

Let’s take a look at each section of the Worksheet to reach a better understanding.

Step 1 of Form 941 Worksheet 1

Step 1 of Form 941 Worksheet 1

Step 1 of Form 941 Worksheet 1

Purpose: To determine the employer share of social security tax after reduced by any credit claimed in Form 8974 or 5884-C.

  • 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, but not 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 (only positive numbers are accepted)

  • 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

    Employer share of social security tax

  • 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 1k

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

  • Line 1l

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

"The Worksheet 1 is built into the TaxBandits Form 941 filing flow, making the calculations much easier!" Get Started Now

Step 2 of Form 941 Worksheet 1

Step 2 of Form 941 Worksheet 1

Step 2 of Form 941 Worksheet 1

Purpose: To determine the refundable and non-refundable portions of sick and family leave credits.

  • Line 2a

    Enter the qualified sick leave wages reported on Form 941, Part 1, line 5a(i), column 1

  • Line 2a(i)

    Enter the 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)

    Enter the total qualified sick leave wages. Add lines 2a and 2a(i)

  • Line 2b

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

  • Line 2c

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

  • Line 2d

    Enter the credit for qualified sick leave wages. Add lines 2a(ii), 2b, and 2c

  • Line 2e

    Enter the qualified family leave wages reported on Form 941, Part 1, line 5a(ii), column 1

  • Line 2e(i)

    Enter the 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)

    Enter the total qualified family leave wages. Add lines 2e and 2e(i)

  • Line 2f

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

  • Line 2g

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

  • Line 2h

    Enter the credit for qualified family leave wages. Add lines 2e(ii), 2f, and 2g

  • Line 2i

    Enter the credit for qualified sick and family leave wages. Add lines 2d and 2h

  • Line 2j

    Non-refundable portion of the 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

    Refundable portion of the credit for qualified sick and family leave wages. Subtract line 2j from line 2i and enter this amount on Form 941, Part 1, line 13

"The Worksheet 1 is built into the TaxBandits Form 941 filing flow, making the calculations much easier!" Get Started Now

Step 3 of Form 941 Worksheet 1

Step 3 of Form 941 Worksheet 1

Step 3 of Form 941 Worksheet 1

Purpose: To calculate the refundable and non-refundable portions of Employee Retention Credit.

  • Line 3a

    Enter the qualified wages (excluding qualified health plan expenses) for the employee retention credit (Form 941, Part 3, line 21)

  • Line 3b

    Enter the qualified health plan expenses allocable to qualified wages for the employee retention credit (Form 941, Part 3, line 22)

  • Line 3c

    Add lines 3a and 3b

  • Line 3d

    Retention credit. Multiply line 3c by 50% (0.50)

  • Line 3e

    Enter the amount of the employer share of social security tax from Step 1, line 1l

  • Line 3f

    Enter the amount of the non-refundable portion of the credit for qualified sick and family leave wages from Step 2, line 2j

  • Line 3g

    Subtract line 3f from line 3e

  • Line 3h

    Non-refundable portion of employee retention credit. Enter the smaller of line 3d or line 3g. Enter this amount on Form 941, Part 1, line 11c

  • Line 3i

    Refundable portion of employee retention credit. Subtract line 3h from line 3d and enter this amount on Form 941, Part 1, line 13d

"The Worksheet 1 is built into the TaxBandits Form 941 filing flow, making the calculations much easier!" Get Started Now

It is not necessary to complete all the three steps of Worksheet 1. Employers should complete the sections based on how they paid their employees.

Let's look at a few scenarios where employers pay wages to their workers to claim credits under
the CARES Act.

For example, ABC Consulting LLC, LM LLP, and Ken Accounting LLC are three different businesses operating in the U.S. with more than 200 employees each. They each want to file Form 941, Employer's QUARTERLY Federal Tax Return, for the second quarter.

Due to COVID-19, these employers have paid their workers and claimed credits under the CARES Act and the Employee Retention Credit. Now, let’s see how their employees were paid and how they should complete Worksheet 1 with Form 941.

ABC Consulting LLC has paid both sick leave and family leave wages and qualified wages under employee retention credit. So they have to complete Step 1, Step 2, and Step 3 of Worksheet 1.
LM LLP employees were paid sick and family leave wages, but no qualified wages under employee retention credit, so it is enough to complete Step 1 and Step 2 of Worksheet 1 while filing Form 941.
Ken Accounting LLC has paid only the qualified wages under employee retention credit, but no sick and family leave wages. Therefore, they must complete only Step 1 and Step 3 of Worksheet 1 in Form 941.

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

TaxBandits is an IRS-authorized e-file provider that enables you to complete and transmit tax returns to IRS/SSA. We support many IRS forms, including Form 941, 940, 944, 943, and 945.

To increase the ease and accuracy of your filing, our software integrates Worksheet 1 into the Form 941 filing process. When you select Form 941 and begin filing for the quarter, you can complete Worksheet 1. By filing form 941 electronically, you will increase the accuracy of your calculations.

When you file your tax returns with us, every form you file will be checked against IRS business rules. Thus, your forms will reach the IRS without errors, and the chance of rejection is significantly less. Check out our user-friendly tax filing features to complete e-filing today.

Here’s how to complete Worksheet 1 while filing your Form 941 with TaxBandits:

  • Log in to your TaxBandits account.
  • Click on “Start New Form” and choose the Form 941 button.
  • Select the quarter that you want to file and click on “Start Filing”.
  • Fill out Part 1 of Form 941 and then complete Worksheet 1 in line 11b.
  • Based on how you paid your employees for the quarter, complete the three steps of Worksheet 1.
    • Complete Step 1, Step 2, & Step 3 if you have paid both qualified sick leave wages and family leave wages & qualified wages under employee retention credit.
    • Complete Step 1 & Step 2 if you have paid qualified sick and family leave wages, but no wages were paid under Employee Retention Credit.
    • Complete Step 1 & Step 3 if you have paid wages under employee retention but not paid qualified sick and family leave wages.
  • Fill out Part 2 and Part 3 of Form 941. Complete Schedule B if you are a semiweekly
    schedule depositor.
  • Select the IRS payment option and review the form summary. If you want to edit any details,
    you can do it.
  • E-sign Form 8453-EMP to authorize TaxBandits to e-file your Form 941. You can also use a 10-digit IRS assigned 94x Online PIN to sign the Form 941 electronically.
  • Pay for our services and transmit the tax return to the IRS.

After transmitting the return, we will notify the status of your return by email. You can also log in to your TaxBandits account to check your return status.

Whether you are an employer or tax professional, we provide tax filing solutions at affordable prices. Check out our pricing information and start e-filing with TaxBandits.

If you have questions regarding form 941 worksheet 1 or need help in filing form 941,
please reach out to our support team via phone, email, or live chat.

Get started with TaxBandits today!

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