Employer Retention Credit - Amend 2020 or record everything in 2021?

Forum|Forum|4 years ago
April 12, 2022
1 reply
27 views

Hi all, I have a client S-Corp who hired an outside consulting company to calculate and claim for the ERTC and can successfully claim over $1,500,000 in ERTC from dates ranging 3/31/2020 to 9/30/2021. Are we supposed to divide this credit between 2020 and 2021 and end up amending 2020 1120s and shareholder 1040's?

Doesn't that mean the 2020 1040 for the S-corp shareholder, once also amended for the corrected k-1, will generate letters indicating massive underpayment penalties and interest?

Would it be better to record the full credit for that entire covered period as a receivable in 2021? It will generated a massive tax bill for the shareholder for April 18, but I'm $1,500,000 coming in should provide a nice cushion for that.

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qbteachmt

Level 15

"Are we supposed to divide this credit between 2020 and 2021"

It's Quarterly. The 941X is for specific quarters.

Yes, that will change the payroll expense for the 1120S for each cycle. This is not like "forgiven" loan accruals. This is Payroll Tax credits against wage expenses.

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Julio354Author

Level 3

Thanks. So it looks like I should obtain the amended 941's and use those are my credits for 2020 and 2021.

Was trying to avoid amending an 1120S for 2020 and the corresponding shareholder's 2020 1040 and risking getting letters saying they owe massive underpayment penalties as a result of the large amendment.

qbteachmt

Level 15

Well, you would have to read up on all of the Acts, updates and IRS clarifications (via notices and procedures) that apply. I would have expected that consultant to be involved. Example:

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

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