2020 Form 5884-A

[othorn]

Form auto calculates 40% when it should be 50%.  40% is the 2019 rate.

When will this be corrected?  is there a workaround?

[TaxGuyBill]

Can you clarify why you think it is 50%?

From the Instructions:

2020 Qualified Disaster Employee Retention Credit (Form 5884-A, Line 1b)

An eligible employer who continued to pay or incur wages after the employer’s business became inoperable because of damage from a 2020 qualified disaster may be able to claim a credit equal to 40% of up to $6,000 of qualified wages paid to or incurred for each eligible employee.

https://www.irs.gov/instructions/i5884a#idm139907417554336

[othorn]

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

This is the retention credit I’m speaking about. 50% in 2020 to 70% in 2021.

[TaxGuyBill]

That COVID credit is taken on the payroll forms (941).

[Edited because I forgot what year it was right now.   🙂  ]

[othorn]

Agreed.  Once the 941-X's have been filed, processed and credit checks received, the entity returns for 2020 must be amended.  In my case it is an 1120S.

Form 5884-A has a line for ERC, but auto calculates at 40%.  Either there is another form to use, Intuit needs to adjust this form to allow for this second tier ERC at 50%, or I will have to do a workaround in ProSeries.

Now, back to my original question.  Is Intuit going to adapt this form or provide another place for the credit?

Thanks,

[sjrcpa]

Per TaxGuyBill the credit is claimed on the 941.

You have to reduce the wage deduction on the tax return due to the credit. Nothing is wrong with the 5884-A

[othorn]

Thanks for your time.

I'll ask someone else.

Have a good day.

[TaxGuyBill]

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@othorn wrote:

Agreed.  Once the 941-X's have been filed, processed and credit checks received, the entity returns for 2020 must be amended.  In my case it is an 1120S.

Form 5884-A has a line for ERC, but auto calculates at 40%.  Either there is another form to use, Intuit needs to adjust this form to allow for this second tier ERC at 50%,

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Are you saying you want to claim the credit on the 941, then AGAIN on the income tax return?  That is what would happen if you file 5884-A. 

Claiming the credit on Form 5884-A is for natural disasters.  Claiming the credit for COVID things are done on the 941.  You don't do both.

[othorn]

agreed

[TaxGuyBill]

If you agree with that, you use (a) 941's to claim the COVID version of the credit, *OR* (b) you use 5994-A to claim the disaster credit. 

So if this is the COVID credit that the taxpayer qualifies for, you DON'T USE Form 5884-A at all.

[othorn]

N-2021-49 (irs.gov)

You are not up to date.  This guidance came out August 4, 2021.  Attaching for your reading.

Intuit is changing the 5884-A to accommodate the 50% and 70% ERC credits per this notice.

So you know, you have to amend 2020 941's to receive the credit, then amend the 2020 income tax return to reduce the wages deducted on the original return by the credit received from the amended 2020 941's.

If you do not amend the original income tax return, you have then taken the full deduction and received the credit.  

Please don't use BOLD when you respond, especially if you are not familiar with what is being asked.

Hope this helps you in your practice.

[TaxGuyBill]

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@othorn wrote:

So you know, you have to amend 2020 941's to receive the credit, then amend the 2020 income tax return to reduce the wages deducted on the original return by the credit received from the amended 2020 941's.

If you do not amend the original income tax return, you have then taken the full deduction and received the credit.  

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Of course you need to amend.  But you DON'T claim the credit on the 941 and AGAIN on the tax return with Form 5884-A.

Can you explain why you think you would claim this credit TWICE?

Again, the credit on the 941s and the credit on Form 5884-A are for two completely different things.

[sjrcpa]

From the Notice:

First sentence under B.

"Under both section 2301(a) of the CARES Act and section 3134 of the Code, the
employee retention credit is claimed against “applicable employment taxes.” 

[othorn]

I agree, you do not claim the credit twice.  That is not what form 5884-A does on an amended return.  Actually, somewhat the opposite.  5884-A is used to show the credit received.  Then that credit flows through to the front of the 1120S, 1120, 1065, etc. to reduce the payroll expense deduction taken on the original return.

Much like the employee tip credit, you either take the credit or the deduction, but not both.  Once you receive the credit from amending the 941's for 2020, you must then use the 5884-A on the amended income tax return to reflect the credits and reduce the total wages originally deducted.

Hope this helps clarify.  Intuit just confirmed they are working on this change for the form 5884-A to deal with the three different ERC's we now have.  (One for disasters 40%, one for 2020 Covid wages 50% and one for 2021 Covid wages 70%.)

[TaxGuyBill]

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@othorn wrote:

5884-A is used to show the credit received. 

Then that credit flows through to the front of the 1120S, 1120, 1065, etc. to reduce the payroll expense deduction taken on the original return.

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Where do you see anything that says that 5884-A is to show the credit that is already received?  Any instructions or citations at all?

Look at the form carefully, and you will see that it is adding the credit to the return, not showing what you already received.  Also, look at the Instructions carefully.  That is not used for the COVID credit.

Yes, the "credit" on 5884-A (for natural disasters, not COVID) flows to the front of the main tax form.  Again, it is a "credit", not a worksheet to show reduced payroll.

[othorn]

Thanks to all for the input and discussion.

[panda62]

Form 5884-A is for Employee Retention Credits that are NOT coronavirus-related - from the 5884-A instructions:

Qualified wages do not include the following wages. • Any wages used to figure a coronavirus-related employee retention credit on an employment tax return, such as Form 941, Employer's QUARTERLY Federal Tax Return.

[dedejacques]

As of 10/21/23, the form still calculates at 40%. I have the same question as the original one here.