Deadline Approaching for Refundable Payroll Tax Credits
The Employee Retention Credit (“ERC”) continues to provide a wide variety of employers with refundable payroll tax credits for qualified wages paid to employees in 2020 and 2021.
Businesses can still apply for the ERC by filing an amended Form 941-X (Quarterly Federal Payroll Tax Return) for the quarters during which the company was an Eligible Employer.
How does the Employee Retention Credit work?
The ERC is a refundable payroll tax credit that can be as high as $5,000 per employee in 2020 and as high as $21,000 per employee in 2021.
Who qualifies for the Employee Retention Credit?
Employers that experienced partial shutdowns due to government orders limiting commerce, travel or group meetings; or that experienced significant declines in quarterly gross receipts (as compared to their quarterly gross receipts in 2019) due to the pandemic are eligible employers under this program.
What are ERC qualified wages?
ERC credits are calculated based on the qualifying wages paid to employees during eligible employer status. For most companies taking advantage of this program, the refundable tax credits are well in excess of the payroll taxes paid by the employers.
ERC benefits can be larger than the amounts a company received in PPP funding.
Are benefits of the Employee Retention Credit the same for large and small employers?
Small employers receive enhanced benefits under the ERC regime. Specifically, for the time they are an Eligible Employer, they can include wages paid to all employees. Large employers can only include wages paid to employees for not providing services.
Can I still apply for the Employee Retention Credit?
Yes. The statute of limitations for the 2020 ERC does not close until April 15, 2024.
The statute of limitations for the 2021 does not close until April 15, 2025.
The ERC application is a 941-X, which is an amended 941. You have 3 years to amend a 941 filing. Therefore, deadline to amend each quarter we are looking at is as follows:
● 2020 Q4 - 1/1/23
● 2021 Q1 - 4/1/24
● 2021 Q2 - 7/1/24
● 2021 Q3 - 10/1/24
Do I take the ERC into income when I receive it?
No. Instead, the employer must reduce deductions for wages on their income tax return for the tax year in which they are an eligible employer for ERC purposes.
Does the Employee Retention Credit have to be paid back?
No. The Employee Retention Credit is a fully refundable tax credit that eligible employers claim against certain employment taxes. It is not a loan and does not have to be paid back. For most taxpayers, the refundable credit is in excess of the payroll taxes paid in a credit-generating period.
How do I apply for the Employee Retention Credit (ERC)?
Going forward, the only way to apply for the ERC is to file an amended Form 941-X (Quarterly Federal Payroll Tax Return) for the quarters during which the company was an eligible employer.
Oak & Acorn Bookkeeping will provide you with a checklist of necessary documents and information. For our initial fee, we will complete a full review and analysis of your submission to determine if any credits are owed to you.
If you are eligible for the ERC, we will calculate the amount of credits due and provide the adjusted 941-X forms needed for remitting to the IRS. Our initial fee will be deducted from the 10% contingency fee owed to Oak & Acorn Bookkeeping based on the amount of your return.
Please note: The amount of your actual refund may be more than the calculated amount our firm provided. This additional amount is the interest on the credits due - you do NOT need to adjust the contingency amount payable to our firm based on this amount. We will only collect to 10% based on the amounts from the attached invoice.
Contact Us today to get your application started. The deadline to apply is December 31, 2023.