The employee retention credit nonrefundable and refundable amounts need to be calculated by following the worksheets that are included on page 28 and page 30 of the Form 941-X instructions.
Worksheet 2 is used for qualified wages paid after March 12, 2020 and before July 1, 2021. The Nonrefundable Portion of the employee retention credit for this period is based on social security wages. The balance of the employee retention credit is considered the Refundable Portion.
Worksheet 4 is used for qualified wages paid after June 30, 2021 and before January 1, 2022. The Nonrefundable Portion of the employee retention credit for this period is based on Medicare wages. The balance of the employee retention credit is considered the Refundable Portion.
These worksheets are not filed with the IRS but should be retained as support.
Both the nonrefundable and refundable amounts of the employee retention credit will be refunded to you so do not be confused by the wording “nonrefundable”.