Employee Retention Credit Not yet realized

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/