IRS Form 941 re-issued for employee retention credit, implications for tax-exempt employers

IRS Form 941 re-issued for employee retention credit

The IRS has re-issued Form 941, “Employer’s Quarterly Federal Tax Return” for 2020 and the related instructions—each with a “note” providing guidance for employers claiming the newly enacted employee retention credit.


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The credit generally is available to tax-exempt employers, regardless of size, whose operations either have been fully or partially suspended due to a governmental order related to COVID-19 or have experienced a significant decline in gross receipts.  Governmental employers—presumably including state universities and community hospitals—are not eligible for the employee retention credit.

The note added and attached to Form 941 and its instructions clarifies that, to claim the employee retention credit, employers that paid qualified wages during the period from March 13, 2020, through March 31, 2020, are to include 50% of those wages together with 50% of any qualified wages paid during the second quarter of 2020 on the employer’s second quarter Form 941, Form 941-SS or Form 941-PR.*

The release explicitly states that employers are not to include the credit on the first quarter Form 941, Form 941-SS or Form 941-PR.

*Form 941-SS is used to report social security and Medicare taxes for workers in American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands. Form 941-PR is used by employers in Puerto Rico to report income taxes, social security tax, or Medicare tax withheld from employees’ paychecks and to pay the employer’s portion of social security or Medicare tax.

Read more in TaxNewsFlash


For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | +1 202 533 8817 |

Preston Quesenberry | +1 202 533 3985 |

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