Tax Credits

941X Employee Retention Credit Example (2023)

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When the Coronavirus disease or COVID-19 pandemic started, there were measures that went into effect to incentivize certain businesses to retain their employees for the duration of the trying times.

This comes in the shape of what’s called employee retention tax credit or employee retention credit—ERTC or ERC, for short. Thing is, not everyone managed to make use of it then. If you’re among them, you should know that it’s not too late to take advantage of it, owing to the Internal Revenue Service (IRS) Form 941-X.

What is Employee Retention Credit or ERC?

In 2020, the 116th U.S. Congress approved the Coronavirus Aid, Relief and Economic Security (CARES) Act. It’s a $2.2 trillion assistance package designed to address the economic repercussions caused by COVID-19, and from there came the ERC. This tax credit is available to small and medium businesses that chose to retain their employees during the pandemic and suffered significant losses in gross receipts in 2020 and 2021 because of limited operations or shutdowns.

What is Form 941-X for ERC?

Eligible businesses (i.e., small and medium employers that kept employees for the duration of the pandemic and suffered a decline in gross income in 2020 and 2021) could initially claim ERC on their quarterly tax returns with the IRS Form 941. Form 941-X is more or less a way for businesses to revise their quarterly tax returns. In other words, employers that missed out on claiming ERC can file this form to apply for the credit and retroactively claim it.

Qualified Businesses

Practically any sort of business entity is eligible for the ERC, which includes nonprofit and for-profit organizations such as corporations and sole proprietors. However, they must meet a certain criteria.

Businesses that were fully or partially suspended because of government orders and thus limiting operations can apply for the ERC. More commonly, this is applicable to restaurants and gyms.

Also, businesses that suffered a substantial decline in gross receipts can file a claim. To be up for consideration, their gross receipts for a calendar quarter in 2020 must be less than 50 percent of the gross receipts compared to the same quarter in 2019. This decline in revenue serves as an indication of the significant impact the pandemic had on their operations. In 2021 and 2022, the threshold to qualify was reduced to 20 percent, making it easier for a broader range of businesses to claim the money-saving credit.

For a more detailed explanation, check our post regarding ERC qualifications and eligibility.

Form 941-X for ERC Requirements

  • Personal information: Specifically, your name, trade name and address, including your Employer Identification Number (EIN).
  • A copy of a filed Form 941 and a blank Form 941-X for every relevant quarter: Prepare a separate completed Form 941 and empty Form 941-X for each quarter you’re going to claim an ERC refund for. (Links to Form 941 and Form 941-X.)
  • Payroll logs: Gather relevant payroll records for each quarter.

How to Fill Out Form 941-X

  • Step 1: Gather the aforementioned requirements: completed Form 941 copies, blank Form 941-X copies and payroll logs.
  • Step 2: Enter your personal information on Form 941-X. This includes your EIN, name, trade name and address.
  • Step 3: Refer to the Return You’re Correcting… section to specify the type of return you’re correcting (Form 941 or Form 941-SS), which quarter you’re correcting (January, February and March; April, May and June; July, August and September; or October, November and December), the year of the quarter you’re correcting and the date you found the errors.
  • Step 4: Refer to Part 1 and choose Adjusted employment tax return for underreported tax amounts or Claim for overreported tax amounts. When filling out Form 941-X for ERC, you’ll typically select the latter option.
  • Step 5: Refer to Part 2 and check the box beside number 3 to specify that you’ve filed or will file Form W-2 (wage and tax statement) or Form W-2c (corrected wage and tax statement).
  • Step 6: If you checked Claim in Part 1 (which is likely the case if you’re using Form 941-X for ERC), then refer to Part 2 number 5 and check the box beside D. This is to signify that the claim you’re filing is for federal income tax, social security tax, Medicare tax or additional Medicare tax that are not withheld. 
  • Step 7: Refer to Part 3. On line 18a, key in the non-refundable portion of the ERC in Column 1 and finish the calculations to fill out the remaining three columns. Then on line 23, combine the amounts on lines 7 through 22 of Column 4. Afterward, on line 26a, enter the refundable option of your ERC. On line 27, combine the amounts on lines 23 through 26c of Column 4. On line 30, write in your qualified wages for ERC.

Note: You can check our detailed posts about qualified wages for ERC and how to calculate ERC for more info. Also, Page 4 of Form 941-X can be left blank for most situations.

  • Step 8: Refer to line 43 in Part 4 on Page 5 and explain your corrections for this quarter. In this case, it’d be best to keep things simple and say you’re amending your return to apply for the ERC credit. Also, you can include a note to indicate that the check can be sent to the address on file.
  • Step 9: Refer to Part 5. Sign your name in the first box and enter the date in the box below. On the right, print your name and title and write down your daytime phone number. If you have a paid preparer, then they will have to enter info such as their name and firm’s name under Paid Preparer Use Only, but if you’re filling out Form 941-X yourself, you can disregard this section. 
  • Step 10: Print and mail the completed Form 941-X to the IRS via mail. The address depends on which state you live in. At the time of writing, there’s no way to send the form online. 
StateMailing Address
Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, WisconsinDepartment of the Treasury
Internal Revenue Service
Cincinnati, OH 45999-0005
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, WyomingDepartment of the Treasury
Internal Revenue Service
Ogden, UT 84201-0005

Note: If the whole process of completing Form 941-X for ERC seems too complicated, or if you simply don’t have the time to do so, you can always refer to third parties to do the heavy lifting for you.

Form 941-X for ERC Deadlines

The IRS has set deadlines for filing ERC claims, and luckily enough, it has provided a lot of time for businesses to gather, prepare and mail the necessary documents. However, it would be best to do this as soon as possible to ensure you receive your credit in a timely manner.

  • All quarters for ERC claims in 2020: April 15, 2024
  • All quarters for ERC claims in 2021: April 15, 2025

For more information, check our post about ERC deadlines, which includes details regarding audit assessment periods as well.

To check your ERC refund status, you can get in touch with the IRS business helpline at (800) 829-4933. Alternatively, you can track the progress online using the bureau’s tool Where’s My Refund?. Read our post on ERC refund status and processing time for a more comprehensive guide.

Form 941-X ERC Example

Here’s an example of a filled-out Form 941-X for ERC (Pages 1 to 5):

Form 941-X Employee Retention Credit Example Page 1
Form 941-X Employee Retention Credit Example Page 2
Form 941-X Employee Retention Credit Example Page 3
Form 941-X Employee Retention Credit Example Page 4
Form 941-X Employee Retention Credit Example Page 5

Summary

The ERC or ERTC is a way for small- and medium-sized businesses that struggled during the COVID-19 pandemic to receive financial aid and recover from the losses incurred because of limited operations and suspensions mandated by the government. However, there are businesses that weren’t able to take advantage of it. That’s where Form 941-X comes into the picture, allowing businesses to file an amended return and retroactively claim the credit.