Reporting Refund from ERC

[MGC94]

Client amended forms 941 for 2020 and 2021 to claim the ERC, resulting in a refund of $520,000 being received in 2023. I am trying to confirm the correct way to report this amount.

From what I can tell, this amount should not affect the 2023 return. It appears the 2020 and 2021 returns need to be amended to deduct the amount of the credit received in that year from the gross wages reported. For example, if the client originally reported $1,200,000 in gross wages in 2021, and received a refund of $400,000 as a result of the amended 941's from that year, 2021 should be amended to reflect $800,000 in gross wages paid.

Thank you all in advance, any and all help is greatly appreciated.

[sjrcpa]

You are correct Conway

[abctax55]

The fees (if any..) paid to file for the ERC refunds however are deducted in the year 'paid', not on the amended returns.

And any interest paid by the IRS on the refunds also goes into the current year (the year received), not on the amended return.   I think...I have to verify that soon for a couple of returns I'm working on this weekend.

[TaxGuyBill]

BEFORE you do anything, look at if it is reasonable that they may have QUALIFIED for that amount of ERC.  There has been WAY too much fraud with that credit, and the IRS has warned tax preparers of amending returns to "perpetuate" an incorrect credit.

https://www.irs.gov/pub/irs-utl/2023-02-professional-responsibility-and-the-employee-retention-credi...

[sjrcpa]

And the get of jail free card on returning bad ERC money expired yesterday, March 22, 2024.