How to File and Claim the Employee Retention Tax Credit with Form 941-X

Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, may just be your key to getting all the Employee Retention Tax Credits that your business is entitled to. It's a 30-page form and the rules are complex, but here are the basics.

First, understand how to use Form 941-X.

According to the IRS: "Generally, you may correct overreported taxes on a previously filed Form 941 if you file Form 941-X within 3 years of the date Form 941 was filed or 2 years from the date you paid the tax reported on Form 941, whichever is later. You may correct underreported taxes on a previously filed Form 941 if you file Form 941-X within 3 years of the date the Form 941 was filed. We call each of these time frames a 'period of limitations.' For purposes of the period of limitations, Forms 941 for a calendar year are considered filed on April 15 of the succeeding year if filed before that date."

Claiming the ERC

With that in mind, consider the special instructions for Form 941-X—and the worksheets it contains—as they relate to the ERC.

Worksheet #2: You must use this worksheet if you claimed the employee retention credit for qualified wages paid after March 12, 2020, and before July 1, 2021, on your original Form 941 and you correct any amounts used to figure the employee retention credit for qualified wages paid after March 12, 2020, and before July 1, 2021. You'll also use this worksheet to figure this credit if you're claiming it for the first time on Form 941-X. If you're a third-party payer, you must complete this worksheet for each client for which it is applicable, on a client-by-client basis.

Worksheet #4: You must use this worksheet if you claimed the employee retention credit for qualified wages paid after June 30, 2021, and before January 1, 2022, on your original Form 941 and you correct any amounts used to figure the employee retention credit for qualified wages paid after June 30, 2021, and before January 1, 2022. As above, you'll also use this worksheet to figure this credit if you're claiming it for the first time on Form 941-X. If you're a third-party payer, you must complete this worksheet for each client for which it is applicable, on a client-by-client basis.

These are just the basics. The details can get complicated, and the IRS estimates the recordkeeping involved takes over 31 hours. Call us so we can help you get everything you're entitled to. Meanwhile, you can download Form 941-X and its extensive instructions from the IRS site.

Looking for more help and guidance related to the Employee Retention Tax Credit? Contact our team.