Employer Social Security Credit—Whose Using and How

In May I conducted a webinar on the Form 941. As is customary attendees can submit questions in advance. One question that I received was very intriguing. The attendee wanted to know if anyone was actually claiming the Employer Social Security Credit permitted under the Hire Act. And if they were using it, how were they taking it. Was it per deposit? Or were they just going to wait and claim the entire quarterly credit on the Form 941? The attendee went on to ask if taking the credit at the end of the quarter was even permitted by the IRS.

See what I mean about intriguing. Of course the first step I took was to review the new instructions for the 941 concerning the credit. Nothing there prohibited the employer from taking it all at once but nothing said okay either. I read the FAQs and again the same thing. So the opinion I gave the attendee was simply that I didn’t see anything that prohibited the employer from taking the credit as a lump sum on the 941 instead of using it deposit by deposit.

But then the more I thought about it the more I wondered if the IRS would actually make the same interpretation if the question were put to them directly. So this morning I sent an e-mail over to the IRS and asked them about taking the credit as a lump sum on the 941. I will share their answer with you in next Thursday’s blog on reporting. I should have it back by then.

The second part of the attendees question asked how other payroll departments were handling the credit in the real world. I made a few phone calls to some payroll friends to take a quick unscientific survey. Amazingly I got the same answer from all of them. If they were using the credit they were waiting until the end of the second quarter and just claiming as a lump sum. It was not worth the time and effort to do it deposit by deposit. What surprised me a little is how many companies are not even using the credit.

So our discussion for today is simple. What are you doing in your payroll department? Are you taking the credit deposit by deposit? Are you going to wait until quarter end and do a lump sum on the 941? Or maybe your company isn’t even taking advantage of the credit. Post a comment and let us know.