COBRA Subsidy Q & A
COBRA Questions and Answers: Technical & System
Q: We understand that IRS systems may experience some downtime in order to make updates to implement processing for the COBRA subsidy credit. How will this affect me if I file my employment returns on paper?
A: The update of IRS systems for processing the COBRA subsidy credit will have no impact on the processing of returns received on paper.
Q: I e-file all of my returns, and understand that IRS systems may experience some downtime in order to make updates to implement processing for the COBRA subsidy credit. How will this affect me?
A: In order to implement the changes for the COBRA subsidy credit, IRS will need to make changes to some of our processing systems. For e-filers this will have no impact on the ability to submit returns electronically.
Q: When will the new e-file specifications be available for Form 941 filing?
A: E-file specifications are posted at 94x XML Developers’ Forum – Employment Tax e-file System.
In addition, two new Error Codes have been developed for 941 e-file processing. Error Codes 204 and 608 have been added for COBRA subsidy processing. The revised Error Code Matrix is posted to 94x XML User Guides and Publications.
Q: I develop software for 941 e-file. When will I be able to test the changes for the COBRA subsidy credit?
A: The Schema was originally made available in March 2009. Updated schema versions are available at 94x XML Developers’ Forum – Employment Tax e-file System.
Q: What other e-file forms will be impacted. When will those specifications be available?
A: For e-file, the Form 944 will also be impacted. Since Form 944 is an annual return, revised specifications were issued later in 2009. Updated schema versions are available at 94x XML Developers’ Forum – Employment Tax e-file System.
Q: Will there be a change to EFTPS for the depositor to indicate the credit taken at the time of deposit? What about the Form 8109, if I make my deposits using paper coupons?
A: There will be no changes to the EFTPS system as a result of the COBRA subsidy credit. If you are reducing the amount of your EFTPS deposit due to COBRA subsidy payments you will not enter sub-category amounts when submitting your EFTPS deposit.
The same is true for deposits made via paper coupon.
The filer will be given credit for the COBRA subsidy payments based on the entry of the credit on Line 12a of Form 941.
Q: When I submit a payroll deposit through the EFTPS system, I am asked to provide a breakdown of the deposit by Federal Income Tax Withheld, FICA Tax, Medicare Tax, etc.(Sub-Categories). Since I am reducing the deposit by the amount of my COBRA subsidy credit, how do I report these amounts?
A: Entering the sub-categories is optional. If you do enter them, the EFTPS system requires that the sub-category entries equal the amount of the deposit or be blank. Since you have reduced the amount of your deposit due to the COBRA subsidy credit, the liabilities reported for the sub-categories on these deposits will not be equal to the amount of the deposit. Leave the sub-category amounts blank, and EFTPS will accept the deposit.
Q: I make my Federal Tax Deposits using the ACH Credit method. How do I report the sub-category data?
A: For ACH Credit transactions omit the sub-category data when you are submitting a reduced deposit due to a COBRA subsidy credit.