Level 2

Form 941, Qualified sick leave wages and SS Limits

Forum|Forum|5 years ago
October 28, 2020
2 replies
13 views

I have a question regarding qualified sick leave wages, Social Security wage limits, and the new Form 941.

I have a client who has an employee who received qualified sick leave wages in the second quarter. My understanding is that these wages are taxable to the employee but not the employer. In the third quarter the employee hit the SS max of $137,700.

I think the employer owes more than the employee does in the third quarter and I am not sure how to report that on the 941. Have I overlooked something obvious?

As an example:

Employee makes $50k/quarter. During the second quarter the employee was paid $5k in qualified sick leave. At the end of the second quarter that employee would have $100k social security wages, but the employer would have only "matched" $95k. In the third quarter the employee would pay on $37.7k and I think the employer should pay on $42.7k.

Your thoughts would be appreciated.

This topic has been closed for replies.

qbteachmt

Level 15

"My understanding is that these wages are taxable to the employee but not the employer."

What is your reference for that?

You did not state this is third-party sick pay, or was paid under an insurance plan and if so, who paid the premiums for the leave? If this is "sick pay" not under either of those conditions, it's taxable compensation as usual.

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T

tmespAuthor

Level 2

The wages paid are Qualified sick leave wages paid under the Emergency Paid Sick Leave Act (EPSLA).

My basis for the taxability of these wages was inferred from the Instructions for Form 941 (Rev. 7-2020), which states, on page 9, for line 5a(i) "Qualified sick leave wages aren't subject to the employer share of social security tax; therefore, the tax rate on these wages is 6.2% (0.062).". I inferred from this line that the wages were still taxable to the employee.

qbteachmt

Level 15

The 941 Instructions have the description for handling adjustments and where not to enter specifically "qualified sick leave wages" . Example: they are reported on Line 5a(i) and not 5a. It includes this: "For 2020, the rate of social security tax on taxable wages, except for qualified sick leave wages and qualified family leave wages, is 6.2% (0.062) each for the employer and employee or 12.4% (0.124) for both. Stop paying social security tax on and entering an employee's wages on line 5a when the employee's taxable wages, including qualified sick leave wages, qualified family leave wages, and tips, reach $137,700 for the year."

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DRS817

Level 2

tmesp,

I'd love to know how you handled this situation, as I have the very same thing. Employee received qualified sick leave wages in Q2 (NPL) and has now reached the $137,700 SS wage limit in Q4. I'm not sure what to do with the variance in wages x .062 that was calculated for Q4.

How did you handle it on the Form 941?

qbteachmt

Level 15

"I'm not sure what to do with the variance in wages"

Are you using the right form 941?

Look here, including FAQ for Recent Developments:

https://www.irs.gov/forms-pubs/about-form-941

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qbteachmt

Level 15

I found another site for FAQ:

https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs

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