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Employee Retention Credit Not yet realized

mike9
Level 4

We have applied for ERC 2020 for several of our clients ranging from $20K to $250K.

None of our clients have received any refunds. I have not been able to find any guidance on how to report the Credit if one  still have not received it. Is  there any guidance that are out there that allows an entity to report it in 2021 instead of 2020 ?

We extended almost all of the qualified entities and there is a potential that we may still have entities that are in limbo past 9/15/2021 .

 

Any help or comments will be appreciated.

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18 Comments 18
dd4vols
Level 10
Level 10

Employee retention credit

Section 2301 of the CARES Act added the employee retention credit, a refundable payroll tax credit equal to 50% of qualified wages (wages, including qualified health plan expenses allocable to the wages) paid by eligible employers to certain employees from March 13, 2020, to Dec. 31, 2020 (now extended to June 30, 2021). Qualified wages are limited with respect to any employee to $10,000 for each calendar quarter. While employers claim the employee retention credit against payroll taxes, rules similar to Sec. 280C(a) apply (CARES Act §2301(e)), meaning that, for income tax purposes, an employer's deduction for wages paid in the tax year is reduced by the amount of the credit claimed, with all employees of a controlled group of corporations or other entities under common control treated as employed by a single employer. By the same token, employers cannot claim as qualified wages for purposes of the employee retention credit any wages for which they receive a credit for qualified sick or family leave under Section 7001 or 7003 of the FFCRA or the Sec. 45S credit for paid family and medical leave. Employers also may not claim the employee retention credit and the Sec. 51 work opportunity credit for the same employee for the same period of time (see IRS FAQs: Employee Retention Credit Under the CARES Act).

And for the ERC applicable to 2020, we  are basically debiting a current asset (prepaid payroll taxes), and crediting wages. raises taxable income>>taxes themselves...but a great trade off for sure/

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mike9
Level 4

Thank you DD..I have the same and the guidance uses  the  word "claimed" and not received. 

I thought I would bring this up because the ERC application is not a clearly understood process due to poor guidance from the IRS . I suspect that  many of the applications may be denied or reduced substantially. IRS FAQ's even have a qualification that the guidance may change 

Related party payroll, pro ration of PPP loan payroll, PPP loan forgiveness applied for prior to 12/29/2021 New  Cares Act etc. are sticking points.

 

 

dkh
Level 15

Isn't the ERC claimed on the Form 941 ?   or an advance requested  on Form 7200 which is then claimed on Form 941 ?    

sjrcpa
Level 15

Yes and Yes. But what if due to the recent change you filed 941X to claim for 2020? This would have been filed in 2021 and refund would not be received yet. 


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dkh
Level 15

right..... so what is the ERC application that  @mike9  is talking about?  

mike9
Level 4

The Credit must be offset against Wages,  Line 7 or 8 on an 1120-S for example, when filing the entity 2020. My concern was for those entities who have not yet received the refund the timing of receiving the refund and the due date for filing the 2020 entity return may become an issue

So this is not a concern for those who already received the refund or credit against future 941 taxes.

dkh
Level 15

LOL....sorry,  I read  ERC application to mean an application form you were completing - not application as in applying   - which led me to think you were confused about the ERC  while all along it was I that was confused.   I need more sleep.     

taxlady2008
Level 3

Thank you for the information.  Just to be clear - I have a client that I still have not completed the 941X returns to claim the ERC credit.  Since they are an accrual based taxpayer (S-corp), I am not able to complete the returns until these reports have been filed.  Is this correct?  I was hoping to account for the credits on the 2021 return but that doesn't appear to be the case.  Correct?  If that is the case, there will be a ton of extensions for the 2020 tax year. 

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qbteachmt
Level 15

"If that is the case, there will be a ton of extensions for the 2020 tax year."

You asked this question on May 15. 1120S was due two months ago; or the extension should have already been filed.

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taxlady2008
Level 3

Yes, I am well aware of the extension deadline  and extensions have been filed. I’m just saying in general. There will be a lot more extensions this year than in the past. 

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mike9
Level 4

IMHO The record number of extensions will be followed by a record number of amendments, letter audits and gnashing of the teeth and hair pulling:)

dkh
Level 15

I've already starting the gnashing of teeth and hair pulling ...... probably should stick to just my hair and leave the clients alone huh

Ed T
Level 1

At the very least your client needs to make the calculation of the ERC that will be claimed on the 2020 941-Xs.  That amount should be booked in 2020 as a reduction in payroll and a receivable.  I have to ask, however, given the lucrative nature of the refundable credit WHAT IS YOUR CLIENT'S PROBLEM!!!  I have done several 2020 941-Xs, coordinated with PPP loan forgiveness applications (making sure not to double dip on the wages), and they are no big deal.  

PS  It is 6/26/21 and we still have not received refunds or IRS communications regarding the 2020 941-Xs filed MANY months ago.  My prediction, the IRS will never fully recover from this fiasco.  After all, they couldn't even keep their heads above water pre-COVID.

ELMORON
Level 1

When we receive the money how is it entered? We took the Hit in 2020 on taxes, so when we receive the money how is it to entered ? As an account receivable?

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mike9
Level 4

Yup credit AR

qbteachmt
Level 15

@ELMORON 

Your own topic is here:

https://proconnect.intuit.com/community/product-help/discussion/ertc/00/170502

And you didn't put anything to indicate you Accrued this payable to you, so you would not put this as AR now. Did you read any of the links provided in your own topic?

It helps not to ask about the same issue in multiple places, because your own topic is the best place for your specific issues.

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shelray
Level 1

If my client is a cash basis tax payer and did not receive the refund until 2022, do I still amend the 2020 & 2021 taxes or can the credit be claimed on the 2022 tax return.

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qbteachmt
Level 15

@shelray Asked twice; it's been answered here:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/re-employer-retention-c...

 

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