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June 19, 2020

EY survey results show how third-party payroll providers are dealing with the COVID-19 employee retention credit

We released a short survey this month asking payroll professionals how their third-party payroll providers are dealing with the CARES Act employee retention credit. Specifically, we asked if their payroll providers have explained to them the process for submitting their employee retention credit data for Form 941 processing, what the deadline is for submitting that data, and what the options are if they miss the submission deadline.

As we previously reported (EY Tax Alert 2020-1199), the IRS has now released a draft Form 941 and instructions that, starting with the 2020 second quarter, provide the details necessary for claiming the federal COVID-19 tax credits, including the employee retention credit. Understandably, the Form 941 reporting process is complex and includes a new Worksheet 1 for figuring the amount available for the various tax credits.

Should an employer miss the payroll provider's deadline for submitting its employee retention credit data (or any other COVID-19 tax credit data), a Form 941-X could be necessary, potentially increasing the cost of filing Forms 941 and raising the chances for reconciliation issues that could result in time-consuming IRS notices.

With the July 31st second-quarter Form 941 deadline just weeks away, it is important that employers now have a clear understanding of the process involved in submitting employment tax credit data to their third-party payroll providers, the deadlines that will apply, and the options available if that deadline is missed, or if incorrect information is provided.

Survey results

As of June 18, 2020, of the 122 survey responders, only 44% reported that their third-party payroll provider had confirmed the process for submitting employee retention credit data for Form 941 processing. That means that the majority of responders (56%) are still uncertain how the information is to be provided and the deadlines that will apply.

Of those responders who have received information from their payroll providers about reporting the employee retention credit, most indicated that the deadline for submission of the 2020 second quarter data to their third-party payroll provider is July 9 or July 15. Very few responders reported that the data submission deadline was sometime in June 2020 or the end of July 2020.

Most responders (40%) indicted that if they miss their payroll provider's deadline for submission of the employee retention data, the payroll provider will file a Form 941-X for added fees.

See the attached PDF file below for the details of the survey results.

Ernst & Young LLP insights

If you have not yet heard from your payroll provider about the process for claiming the employee retention credit or other COVID-19 tax credits on the Form 941, you might consider reaching out now to obtain this information.

It is important to keep in mind that most payroll providers will require your COVID-19 tax credit information ahead of the Form 941 filing due date. This means that you may need to begin the process of figuring the 2020 second quarter tax credits by the end of June or the first week in July, depending on your payroll provider. Missing the deadline could mean that your payroll provider will impose added fees for the filing of the Form 941/Form 941-X.


Contact Information
For additional information concerning this Alert, please contact:
Workforce Tax Services - Employment Tax Advisory Services
   • Kenneth Hausser (
   • Debera Salam (
   • Kristie Lowery (
   • Peter Berard (


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