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Payroll Managers: Note Changes to 2011 Form 941

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The IRS made several tweaks and changes to Form 941, Employer’s Quarterly Federal Tax Return for 2011, and the updated form is now available. As you sit down to figure out your quarterly payroll taxes, here’s a quick look at the changes:

Change in employee Social Security contribution rate for 2011. The tax rate for employees is now 4.2% for 2011 as a result of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The employer’s contribution rate remains unchanged at 6.2%. (Luckily, the updated form has a reminder about the reduced tax rate that you can’t miss.)

A new line added for reporting tax due on tips that were unreported. Section 3121(q) Notice and Demand is a place for reporting Social Security and Medicare tax on previously unreported or under-reported tips. For more information, see instructions for Form 941, Section 5e.

The qualified employer’s Social Security tax exemption, which expired on December 31, 2010, is no longer an option.

The ending of the advance earned income credit. While the earned income credit is still available to taxpayers, the government eliminated the advanced option for earned income credit as of Dec. 31, 2010. Note: remind your employees that if they received the advanced EIC in 2010, they need to report this credit on their 2010 federal income tax return.

COBRA premium assistance credit. If you helped a former employee on your payroll make their COBRA payments, you may qualify to take a tax credit.

Electronic funds transfer for federal payroll tax deposits. By now, I hope you know about the requirement for employers to file all federal tax deposits electronically. if not, get up to speed by reading the previous blog article “Changes Ahead for Employers Making Federal Payroll Tax Deposits.

A block of greyed-out lines (6a-d) “reserved for future use.” Sounds like another payroll mystery to be solved…

Here is a link to the 2011 Form 941 and instructions for filling it out.

If you have any comments about the new form, please feel free to share.

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