Introduction
The ERC tax credit has become ideal for businesses that had a partial closure or lost revenue due to the COVID-19 pandemic. The tax credit applies to paid wages from April 2020 to September 2021. So, what about the employers who couldn’t claim this tax credit? Well, this is where the F941 refund comes into play.
Companies that couldn’t claim the ERC can now opt for an F941 refund. All employers have to do is amend their Form 941 to claim the F941 refund. If you don’t want to deal with massive backlogs, you can always get the help of a tax expert.
Employers can check out their F941 refund status online or via phone. Typically, it requires employers to be patient before they can receive their F941 refund. In some instances, it takes longer than usual to process and pass the F941 refund to the employers.
With an F941 refund, employers can cover operational expenses. However, if you run a partnership or a sole proprietorship, you can secure and pocket an F941 refund. Getting an F941 refund involves a straightforward process, but since it takes a long time to process, it requires patience from the employers to obtain the actual refund.
In this guide, you’ll learn about the basic F941 rules, how to check refund status, and the process to file the claim:
F941 Refund Basics
What is the F941 refund? It is a refund that applies to COVID-19-specific payroll credit. How does the f941 refund work? The mechanics and guidelines of the F941 refund are straightforward. People who couldn’t claim the ERC using 941 forms can request an F941 refund.
However, understand that the tax credit is not passed and processed automatically. Instead of an automatic credit – it works for folks who couldn’t claim the tax credit on their 2020 and 2021 returns. One of the requirements for these businesses is to maintain payroll deposits. It means these employers cannot use the F941 refund sum to offset their entire payroll deposits.
F941 Refund – Status Check
How to check status of the F941 refund? It is easier than you think. If one of your virtues is patience, you’ll find the process of checking the status of the F941 refund straightforward. It takes a lot of time because the IRS has millions of 941 forms.
On top of this backlog, there are hundreds and thousands of unprocessed 941-X forms. In fact, the IRS cannot process many 941-X forms until the original 941 forms are clear. And if you think you’re in a long queue – understand that you’re not alone. Many employers are waiting to check the status of their F941 refund.
Nonetheless, send your amended forms through certified mail. With certified mail, you should be able to track your package and ensure the IRS gets it on time. You should also reach out to the IRS by phone and inquire about amended returns. Make sure to keep a copy of your previous tax return and EIN for identity verification purposes.
You should also take into account some considerations when checking your F941 refund status. For starters, don’t make the mistake of filing the wrong form or count on your accountant to be aware of everything. Also, keep calm while communicating with IRS employees via phone or in person.
Filing Process of F941 Refund
Before you can claim your F941 refund, make sure to amend your payroll tax on the 941 forms. Also, ensure you meet the prerequisite requirements before claiming the refund. If you’re unsure about the filing process for an F941 refund, get the help of a tax professional to determine your eligibility and navigate through the filing process.
- Get Form 941-X
The difference between the original 941 forms and the 941-X is that the latter is amended. The “X” shows that the tax return is an amended version. Also, use the original form number to file an amended Form 941-X.
The annual tax filers use Form 944-X, whereas the quarterly tax filers use Form 941-X. The latter option is reserved for businesses that pay lower than $1,000 in annual payroll taxes. Most importantly, select the correct year before getting and filling out Form 941-X. In fact, the IRS makes changes to its wide range of forms each year.
- Use a Different Form for Quarters You Need to Amend
If you’re an annual filer, use a different form for each year when you make your claim. But the last thing the quarterly filer wants to do is use the same form to amend multiple quarters. So, use a separate Form 941-X for every quarter you need to amend. When you combine the last three 2020 quarters and the first three 2021 quarters, you’ll need, in total, six separate forms.
- Copy Original Filing Information
Your next step should be to copy the original filing information. But don’t generalize the copy process, and be strategic about it. The main details on your Form 941-X and amended payroll form should have the same information as the original forms. It means the paid wages and deposits made every quarter should be the same. Understand that you’re claiming the tax credit and then will use it to claim an F941 refund.
Depending on your filing data, don’t hesitate to make relevant changes that apply to you. For instance, if you spot a mistake in your original tax return – you will have to rectify that mistake at the time of amending your tax return. But in case of refilling and claiming ERC– refrain from making changes.
- Highlight the Date You Found Errors
It’s not enough to identify any direct errors you may have made in your original tax returns – you have to note the specific date you found these errors. The idea is to note these spotted errors with a specific date at the time of filing the amended Form 941. It shows that you realized and recognized a filing error and took a proactive approach to correct the error through an amended return. While situations vary, take into account the date you realized that you could claim ERC.
- Fill Out Relevant and Required Worksheets
It is imperative for employers to fill out the required worksheets. The IRS has made a combination of worksheets available. You can use these worksheets to calculate your applicable credit on the F941 refund. For specific purposes, you can use a worksheet 1, 2, 3, 4, and 5.
Whether it’s a worksheet one, two, three, four, or five, focus on the information that applies to you and stick to the guidelines. So, what are the essential worksheets that you can use to make these calculations? Well, worksheet one revolves around credits for eligible family and sick leave on paid wages from March 2020 to April 2021.
The same credits in worksheet three have a time window from March 2021 to October 2021. Back to worksheet two – it involves employee retention tax credit on paid wages from March 2020 to July 2021. This worksheet ties together with worksheet four, which involves employee retention tax credit on paid wages from June 2021 to January 2022. Last but not least – worksheet five includes credits assigned in COBRA premium.
- File the Claim
Your last step is to choose the right method to file your claim. Use the mailing option with the “right” address to file your claim. While taxpayers can submit a lot of forms online, Form 941 doesn’t involve e-filing. If you’re stressed out about the manual approach – understand you just need to get printed copies of amended tax returns and then mail them as a request to get the status of your F941 refund.
Make sure to select and send the mail to the correct location in order to avoid potential processing errors, leading to more delays. Like address, make sure to send your forms before the deadline. The good news is that employers have three full years from their original filing date to ask for an F941 refund.
Practically, businesses have until 2023 to ask for an F941 refund. It is more than enough time to make proper amendments with the correct date and address and ensure your claim gets you a refund successfully.
Final Thoughts
From the perspective of businesses, it can be a complicated and lengthy process to claim and receive F941 refunds. The wise thing for employers is to get in touch with a tax professional, figure out the best way to claim an F941 refund, and set a realistic timeline to receive the refund amount. As long as you don’t miss the current deadline, you should be able to file, claim, and receive an F941 refund.
It might be easiest for you and your business to opt for an experienced tax professional to make it easier for you to file and claim an F941 refund on paid wages amid the COVID-19 crisis. Once a tax specialist reviews and determine your eligibility, you can file the claim forms for the F941 refund. With the right guidance and support, you’ll start to see the F941 refund as an opportunity.
