Has your company made any of these common mistakes when filing your employment taxes and claiming credits? Filing an amended return to correct these common errors can be costly and time-consuming for employers. Below are some important reminders your company should keep in mind when preparing your employment tax returns and claiming credits on Form 941.

6 errors to avoid

1. Properly use line 1 on Form 941 – Line 1 does not necessarily represent the number of employees who were paid during the quarter. Rather line 1 should include the number of employees on your payroll who were paid wage items for the specific pay period that includes the 12^th days of the third month of the quarter. Depending on the quarter indicated at the top of Form 941, these pay periods are March 12, June 12, September 12, or December 12. Employees that would not be included in line 1 are household employees, employees in nonpaid status for the pay period, farm employees, pensioners, and active members of the U.S. armed forces.
2. Properly use line 7 on Form 941 - Line 7, current quarter’s adjustment for fractions of cents, on Form 941 should only be used for rounding purposes relating to the employee share of Social Security and Medicare taxes. This may be either a positive or negative adjustment.
3. Only claim credits you are eligible for on Form 941 – To see if you are eligible to claim a credit, your company should review IRS guidance before completing Form 941. We also recommend you talk with a reputable tax preparer or other knowledgeable tax professional to help avoid any errors in filing. Before your company claims credits on Form 941, you should ensure:
   1. You are eligible to claim the credit
   2. You are claiming the credit correctly
   3. That you do not claim a credit that exceeds the limitations
4. Report advanced payments of credits received on Form 941 – Your company should only report advanced payment of credits you have received, not requested, on Form 941. Form 7200, Advance Payment of Employer Credits Due to COVID-19, is used to request advance payment of credits. Form 7200 can be used to request an advance payment of the tax credit for qualified sick and family leave wages, the employee retention credit, and/or the COBRA premium assistance credit. A few other key reminders when reporting credits on your Form 941:
   1. If you have received an advance payment of credit but have not claimed the corresponding credit on Form 941, you may receive a balance due notice.
   2. If you have filed an employment tax return and did not report a credit you were entitled to, you will need to file an amended return to claim those credits. An amended return can be filed using Form 941-X.
5. Inform third-party payers of any advanced payments or credit – If your company utilizes a third-party payer or reporting agent, your company must disclose to them if you have requested or received an advance payment of credits before filing Form 941. Additionally, any third-party payers, including reporting agents, should inquire if you have requested or received any advance payment of credits before filing Form 941.
6. Properly completing Form 941-X – If you have already filed Form 941 and did not report a credit you were entitled to, then you should complete an amended tax return using Form 941-X to claim this credit. Don’t forget to complete all lines associated with claiming this credit on Form 941-X. Often the lines related to qualified wages and qualified health plan expenses allocable to those wages can be easily forgotten on Form 941-X.

Need help filing your employment tax returns or claiming credits? We can help.