New Form 941 Worksheet 4
for 2021

Calculating the Employee Retention Credit

New Form 941 Worksheet 4 for Q3 & Q4 2021

Updated on September 21, 2021 - 10:30 AM by Admin, TaxBandits

Last quarter, the IRS overhauled Form 941 and added four new worksheets. Employers will need to use Worksheet 4 for the third and fourth quarters of 2021 to calculate the Employee Retention Credit.

The following topics are covered in this article:

1. Purpose of the Form 941 Worksheet 4

The Form 941 Worksheet 4 will be used by employers to calculate their refundable and nonrefundable portions of the employee retention credit during the third and fourth quarters of 2021. This worksheet applies to qualified employees’ wages paid to employees after June 30, 2021.

2. Line by Line instructions for the new Form 941 Worksheet 4 for Q3 & Q4

Worksheet 4 has two steps. In step 1, employers will determine their share of Medicare taxes and in step 2 they will calculate the refundable and non-refundable portions of the employee retention credit. Employers will need to complete both step 1 and step 2.

If you are claiming sick and family leave credits for leave taken after March 31, 2021, you should fill out Worksheet 3 before starting Worksheet 4.

 Step 1- Form 941 Worksheet 4

Step 1

  • Line 1a

    This line will be completed differently based on whether or not you are claiming credits on paid sick and family leave wages. Here is how you should proceed:

    • If you are claiming sick and family leave credits on qualified wages (taken after March 31, 2021) enter the amount from 941 worksheet 3, Step 1, Line 1f
    • If you are NOT claiming sick and family leave wages (taken after March 31, 2021) skip this line and pick up with line 1b
  • Line 1b

    Copy the amount from Form 941, Part 1, Line 5c, Column 2.

  • Line 1c

    Multiply line 1b by half.

  • Line 1d

    All third-party payers that are claiming credits for amounts paid to employees should enter their employer-share of Medicare here. This can be found on IRS Form 941, Part 1, line 8.

  • Line 1e

    Subtract the amount on Line 1d from the amount on Line 1d, enter the sum here.

  • Line 1f

    Any employer that received a Section 3121(q) Notice and Demand from the IRS during this quarter should enter the employer-share of Medicare taxes from this notice.

  • Line 1g

    This is the total employer share of Medicare taxes, to get the total, take the sum of lines 1e and 1f.

Step 2

 Step 2- Form 941 Worksheet 4
  • Line 2a

    Enter the qualified wages for the employee retention credit, found on Form 941, Part 3, Line 21

  • Line 2b

    Enter the qualified health plan expenses allocated to these wages, found on Form 941, Part 3, Line 22.

    The totals entered on Lines 2a and 2b can’t be more than $10,000 per employee, per quarter.

  • Line 2c

    Take the sum of Lines 2a and 2b, enter it here.

  • Line 2d

    Multiply the amount on Line 2c by .70, enter the new amount here.

    If your business only qualifies for the employee retention credit because it is a recovery startup, the maximum amount you can enter on Line 2d is $50,000 per quarter.

  • Line 2e

    Enter either amount from step 1 of this worksheet that applies to your business:

    • Line 1a
    • Line 1g
  • Line 2f

    Copy the amount from Worksheet 3, Step 2, Line 2r here.

  • Line 2g

    Subtract the amount on Line 2f from the amount on Line 2e, enter the difference here.

  • Line 2h

    This is the total non-refundable portion of the employee retention credit. Enter whichever amount is smaller, the value on Line 2d or the amount on Line 2g.

    • Enter this amount on Form 941 (Part 1, Line 11c).
  • Line 2i

    This is the total refundable portion of the employee retention credit. To get this amount, subtract the amount on Line 2h from the amount on Line 2d. Enter the difference between.

    • Enter this amount on 941 (Part 1, Line 13d).

3. When is the deadline to file 941 for the 3rd quarter of 2021?

The deadline to file Form 941 with the IRS for the third quarter is October 31. Because this date falls on a Sunday in 2021, the deadline will be the next business day. Therefore, the deadline for the third quarter of 2021 is
November 1, 2021.

4. How to complete the 941 Worksheets and e-file Form 941 for Q3 & Q4
of 2021?

Due to the ongoing COVID-19 pandemic and the frequent updates to Form 941, it is no longer an easy form to paper-file. It is now much more complex and requires many more calculations. One of the best perks of e-filing with TaxBandits is that we take care of the tedious calculations.

Starting your Form 941 with TaxBandits is simple! Just follow these steps:

  • 1. Sign in or create your TaxBandits Account

  • 2. Click “Start New Form

  • 3. Choose "Form 941" and enter the details.

  • 4. Review, Pay and Transmit to the IRS.

E-filing 941 not only saves you time when filing, but it promotes the accuracy of your Form 941. Plus, the IRS is able to process e-filed forms at a much faster rate. There is no need to worry about the 941 Worksheets, each one is integrated into the TaxBandits e-filing process.

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