Employee Retention Credit for First Quarter and Second Quarter Qualified Wages Should Be Reported on Second Quarter Form 941

Employee retention credit. The employee retention credit is designed to encourage businesses to keep employees on their payroll during the COVID crisis. A refundable tax credit or advance tax credit of 50% of up to $10,000 in wages paid is available to an eligible business whose been financially impacted by COVID-19. The credit is calculated quarterly. Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit. Wages are not limited to cash payments, but also include a portion of the cost of employer-provided health care. The credit may be provided by advance payments to eligible employers (see IRS : Employee Retention Credit)

Form 941 and instructions. There is a preceding page accompanying the Form 941 and its instructions. The page advises that employers should not report a credit for 50% of qualified wages paid from March 13 through March 31 on the first quarter Form 941, 941-SS or 941-PR. The IRS instructs that qualified wages paid from March 13, 2020 through March 31, 2020 must be reported on the second quarter Form 941 along with qualified wages paid from April 1 through June 30 for the employee retention tax credit.

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