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Employee Retention Credit Not yet realized

mike9
Level 3

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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dd4vols
Level 9

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 3

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 11

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 11

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

mike9
Level 3

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 11

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.