Employee Retention Tax Credit (ERTC) Refund on a CASH BASIS in 2023

[Alex T]

Hi All - 

I have a clinet who files 1120-S and is on a cash basis.

In 2023, he applied for ERTC through an outside consultant who filed amended payroll tax returns for 2020 and 2021. The ERTC refund was received in the fall of 2023.

Can the refund, net of commissions, be picked up in 2023 as other income since it is CASH BASIS taxpayer? - to avoid amended any prior income tax returns... again, since it is a CASH BASIS taxpayer...

Thanks in advance.

[abctax55]

Nope... you have to amend prior year returns for the ERC money.

BUT, the fees paid are deducted in the year paid - 2023 for your client.

[TheTaxReductionCPA]

Be careful filing ERC income tax returns prepared by 3rd parties. You have an obligation to review those claims for accuracy as the filer, and if the client gets audited and the ERC is grossly misstated, the client does have a position to "assume" you reviewed that claim and approved it, since you filed the amended return, and then sue you when they find out the ERC provider has skipped town.