EMPLOYEE RETENTION CREDIT

[tax1394]

My client never originally requested the ERC when we filed the 1st qtr 2020 941. i am now doing an amended 941x. Do you only get refunded the employer portion of SS tax? Not federal tax deposits? 

This client is entitled to 100k max ERC, and originally paid 28k in federal tax, 27k in ss tax and 6k in medicare tax. 

[qbteachmt]

“Do you only get refunded the employer portion of SS tax? Not federal tax deposits?”

Let’s separate “what qualifies for credit” and “what is the banking” because the Deposits are the Banking.

The deposits could have been minimized by holding them as an advance against a credit: “Eligible employers can reduce federal employment tax deposits in anticipation of the credit.” So, it’s a bit late to worry about that part.

The Credit will be for qualifying wages. It’s for up to 50% of them: “The refundable credit is capped at $5,000 per employee and applies against certain employment taxes on wages paid to all employees.”

And the new law updated the limit: “As a result of the new legislation, eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021.”

I recommend starting from these links:

https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-how-to-claim-the-employee-r...

https://www.irs.gov/coronavirus/employee-retention-credit

https://www.irs.gov/newsroom/new-law-extends-covid-tax-credit-for-employers-who-keep-workers-on-payr...

https://www.irs.gov/coronavirus/employer-tax-credits

"originally paid 28k in federal tax, 27k in ss tax and 6k in medicare tax"

Which doesn't define the tax payments by employer, employee, or if "federal tax" is the Employee's income tax withholding. Again, for 2020, it's too late to get advanced payment or hold back deposits against claiming the credit, anyway.