Instructions for Form 941 Checklist – 2021 Tax Year
The 2021 Employer's Quarterly Federal Tax Return reflects significant changes introduced by the American Rescue Plan Act and modifications from the CARES Act provisions that initially established the employee retention credit in 2020. Employers who paid qualified wages during
2021 must understand how ARPA provisions affect quarterly liability calculations and credit eligibility on their federal tax return.
Identifying the Correct Quarter and Filing Deadlines
You must determine which quarter you are filing for: Q1 covering January through March, Q2 covering April through June, Q3 covering July through September, or Q4 covering October through December of 2021. Line 1 of the 2021 form requires accurate period identification.
Form 941 is due by the last day of the month following the end of the quarter, regardless of your
deposit schedule. Employers who made timely deposits in full payment of their payroll taxes for the quarter may file by the 10th day of the second month following the quarter-end.
Your deposit schedule depends on the total tax liability you reported during the lookback period, not on how often you pay employees. Monthly schedule depositors report their liability on Line
16, while semiweekly schedule depositors must complete and attach Schedule B.
Reporting Wages and Federal Income Tax Withholding
Enter total wages paid to all employees on Line 2 of the 2021 form. Include all wages subject to federal income tax withholding without reduction. Report the federal income tax withheld from employee paychecks on Line 3. The 2021 instructions require that all wage categories be included in your quarterly federal tax reporting.
Calculating Social Security Tax and Medicare Tax
Line 5a requires you to multiply taxable Social Security wages shown in Column 1 by 12.4 percent and enter the result in Column 2. Line 5b requires you to multiply taxable Social
Security tips shown in Column 1 by 12.4 percent and enter the result in Column 2.
Line 5c requires you to multiply taxable Medicare wages and tips shown in Column 1 by 2.9 percent and enter the result in Column 2. Calculate these amounts on all wages subject to FICA
using the methodology consistent with prior years, and do not reduce wages based on employee deferrals or credits claimed under the American Rescue Plan Act.
Claiming the Employee Retention Credit Under ARPA
The employee retention credit for 2021 operates under rules distinct from the original CARES
Act provisions. You must report the credit in two parts if your business is qualified under the
2021 ARPA rules.
Enter the nonrefundable portion on Line 11c and the refundable portion on Line 13d of your quarterly federal tax return. Complete Worksheet 2 for the second quarter or Worksheet 4 for the third and fourth quarters to calculate both portions of the payroll tax credit.
Do not reduce wages reported on earlier lines when claiming the employee retention credit, as the credit is claimed separately from wage reporting. Recovery startup business status affects eligibility during the fourth quarter of 2021, as the Infrastructure Investment and Jobs Act limited the credit for most employers after September 30, 2021.
Reconciling Tax Liability and Deposits
Begin by reporting the total quarterly tax deposits made for the 2021 quarter on Line 13a. Next, compare the adjusted total tax liability shown on Line 12 with the deposits claimed on Line 13a.
When deposits are greater than the tax liability, report the difference as an overpayment on your federal tax return. If the total liability exceeds the deposits made, the difference represents an underpayment that must be paid.
Line 12 must match the total quarterly tax liability reported on Line 16 for monthly schedule depositors or on Schedule B for semiweekly schedule depositors. Under the 2021 filing instructions, this reconciliation is required for all filers, including those who claimed the employee retention credit or other applicable credits during the quarter.
Reporting Sick and Family Leave Credits
The wage reporting treatment for paid sick and family leave credits depends on when employees took leave during 2021. Qualified wages for leave taken after March 31, 2021, and before October 1, 2021, are included on Line 5a and taxed at 12.4 percent for Social Security tax purposes.
Qualified wages for leave taken before April 1, 2021, are reported on Lines 5a(i) and 5a(ii) and
taxed at 6.2 percent. Claim the credits separately on the designated lines
- Line 11b reports the nonrefundable portion for leave taken before April 1, 2021.
- Line 11d reports the nonrefundable portion for leave taken after March 31, 2021.
- Line 13c reports the refundable portion for leave taken before April 1, 2021.
- Line 13e reports the refundable portion for leave taken after March 31, 2021.
The credits do not reduce the wage amounts reported on earlier lines. Some employers claimed these credits for leave related to COVID-19 vaccination or recovery during 2021.
Signature Requirements and Record Retention
Complete the certification section in Part 5 at the bottom of your 2021 form, attesting that the information reported is accurate and complete. An officer, manager, or responsible agent of the business must sign the quarterly federal tax return, and the 2021 form requires the signer's printed name and title, along with a daytime phone number.
Keep payroll records, deposit confirmations, and employee retention credit documentation for the 2021 quarter filed. The 2021 instructions require retention of records supporting all wages, taxes, and credits claimed, but do not mail supporting documents with your federal tax return.
Understanding 2021-Specific Modifications
The 2021 form continued to use Line 11c for the nonrefundable portion of the employee retention credit, with modifications reflecting the American Rescue Plan Act. Employers should consult Notice 2021-49 for guidance on wages paid after June 30, 2021, and before January 1,
2022, as the credit treatment differs significantly from 2020 provisions under the original CARES
Act framework.
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