How the F-941 Refund Affects Your ERC Submission

With the rules and regulations surrounding the Employee Retention Credit (ERC) — also called the Employee Retention Tax Credit (ERTC) — constantly changing, many small and medium-sized companies are leaving valuable capital on the table. If you own a small business and struggled to operate at full capacity during the pandemic, your business may be eligible for a refund.

You may be wondering what paperwork you should send to the IRS to apply for the ERC, what the Form 941 is, and why the Form 941 refund matters for your company — especially if you’ve already filed your 2021 Quarterly Federal Tax Returns.

We’re here to answer these questions and explain in detail how Form 941 affects your business’ ERC application.

What are the federal forms 941 and 943?

Also known as the Employer’s Quarterly Federal Tax Return, businesses use Federal Form 941 to report information like:

  • Paid wages
  • Tips paid to employees
  • Withheld federal income taxes from employee paychecks
  • Social Security and Medicare taxes from both employees and employers

Most companies must file this form each quarter since failure to do so can result in penalties from the IRS. The IRS deadlines for quarterly forms are April 30, July 31, October 31, and January 31 every year.

What information is required on a Form 941?

The information needed to complete your business’ F941 form includes:

  • Number of workers
  • Total wages paid
  • All adjustments made for tips, group life insurance, and sick days
  • Employee’s federal income tax withheld
  • All withheld Social Security and Medicare taxes

Federal Form 943

Federal Form 943 is an employer’s annual federal tax return for agricultural organizations. This form must be completed if your business is required to report wages paid to one or more farmworker employees that were eligible for Social Security and Medicare taxes. It also applies to farmworkers who were subject to federal income tax withholding.

Furthermore, you're required to withhold wages if:

  • Your business paid $150 or more in employee cash wages for agricultural labor in the year
  • Your business paid $2,500 in the year for agricultural labor expenditure

Both forms may be required if your business has both non-farmwork and farmwork employees.

What Is the F941 refund?

An F941 refund is a COVID-19 payroll tax credit provided retroactively for small to medium-sized businesses. It is based on wages that were paid from April 1, 2020 to September 30, 2021. 

People who didn’t claim the credit on their 941 forms filed during 2020 and 2021 can request a refund by filing an F941-X Form. This is the amended form of an F941 return.

How does the F941 refund affect my business’ ERC application?

If your company failed to claim the ERC from the first quarter of 2020 to the third quarter of 2021, you can still file a Form 941-X to fix your previous F941 form and take advantage of the ERC.

By filing Form 941-X within three years after the original F941 was filed —or two years removed from the date you paid your F941 tax —your business may qualify for the ERC.

How do I file for the F941 refund?

First, check that you have all documents needed to apply for the ERC. Then, to file for an F941 refund, complete these steps:

1. Locate the correct form

The “X” used by the IRS in Form 941-X indicates an amendment of a tax return. Therefore, the tax return you need to amend should use the same form number with the X after it. For instance, quarterly F941 filers will use F941-X for return amendments, while annual F941 filers will use their respective form, which is F944-X. 

F944 only applies to employers who pay less than $1,000 per year in payroll taxes. 

In addition, the IRS changes its forms year after year, so you must find the right form for the right year.

2. Get a form for each quarter that needs an amendment

Since most companies need to file an F941 form each quarter, the same process applies here for each quarter you wish to fix with an F941-X form.

3. Use the filing details from your original F941 Form

The information you use for your 941-X forms should match the information on your original F941 forms. This includes wages your business paid and deposits it made. The only difference between the two forms is that in the case of a refund, your business is claiming the credit, but using it to claim a refund (if it’s eligible).

However, if your business is refiling only to apply for the ERC, there are no changes needed.

4. Fill out the IRS F941 worksheets

To determine the credit for an F941 refund, you will need to use these worksheets from the IRS. Here are the credits considered in each worksheet to help estimate a business’ potential refund:

  • Worksheet one. Can help you figure out qualified credits for sick and family leave wages. This applies to leaves taken after March 31, 2020 and before April 1, 2021.
  • Worksheet two. Can help calculate the ERC amount for all wages paid after March 12, 2020 and before July 1, 2021.
  • Worksheet three. Can assist in calculating the same wages as worksheet one, but for 2021 qualified sick and family leave wages for leave taken after March 31, 2021 and before October 1, 2021.
  • Worksheet four. Similar to worksheet two, this worksheet helps calculate the ERC amount for wages paid after June 30, 2021 and before January 1, 2022.
  • Worksheet five. Helps your business determine qualified credits for premium assurance under the Consolidated Omnibus Budget Reconciliation Act (COBRA). 

Additionally, your business may be eligible to receive extra credits if it paid family and sick leave wages or was offered COBRA help toward wages that qualified. These credits can also be awarded as a refund from your 941 Form.

5. Record the date(s) you found errors or potential ERC eligibility

When filing a 941-X form and applying for the ERC, you must record the date you discovered any errors in your original 941 form or potential ERC eligibility. Although the date your business potentially became eligible for the ERC isn’t technically an error, it’s necessary to note when you noticed potential ERC eligibility, which prompted filing an amended return.

6. Mail the form to the right address

To complete an amendment of a 941 form, you must print out copies of your amended returns and mail them to the IRS. You cannot do this by e-filing. 

Furthermore, you must send these by the mentioned deadlines to the right location. Depending on where your company is, you will either send them to Ohio or Utah. If you don’t, your business won’t be able to receive a refund if it’s eligible.

Does your business need help filing for an F941 refund?

At Innovation Refunds, we have a network of tax attorneys, CPAs, and tax professionals who are well-versed in tax code and ERC nuances. Even if your CPA said your business doesn’t qualify for the ERC, it doesn’t hurt to try again as our team of highly qualified professionals work hard to ensure every company gets back the capital they may be eligible to receive.

Our application process is easy — simply fill out our intake form to find out if your business is eligible to work with us. From there, we walk you through each step so you can focus on running your business.

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