Employee Retention Credit

[MGC94]

Email from client:

Do you know anything about the Employee Retention Credit program?  Apparently, this is a tax refund based on gross receipt losses from the Covid era between 2019, 2020, & 2021.

I kind of quickly checked over the qualifications and I believe I'm there. According to what some advertising shysters have been saying, it can be up to $26k per employee retained.  That's a major chunk of cash.  I don't want to get involved in giving money to snake oil salesmen, so if you or someone honest you know can do it, I'll gladly pay what the going price is.

I tried calling the IRS business line. The lady was so confused she just hung up on me. Has anyone done this? 

[qbteachmt]

Who does their payroll? That's who you should pass this over to.

Established by the CARES Act, the ERC provides a fully refundable tax credit which can be taken against certain employer payroll taxes. The ERC is not an income tax credit; it is a payroll tax credit and is ultimately reflected on Form 941.

What they would have done is, every quarterly, they would compute the credit and retain some of their FICA despot funds against their entitlement. If the employer’s payroll tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS.

The American Rescue Plan Act of 2021 has expanded the period this credit can be claimed through the end of 2021. The dates are hit and miss, and the qualifications are a bit of a matrix.

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-general-information-faqs

After the fact, there is the ability to file for refunds and then amend the business income tax return. There are service providers that are charging for this service, but anyone already running payroll for a company should have been up on it all along as it developed and changed over the covid years.

[MGC94]

How would you file for refunds on the tax return?

[MGC94]

Have you found a reputable company who is doing it? I had one call and say 15% of whatever the business gets

[qbteachmt]

They file 941X for the quarter where they should have done it contemporary to the provision. These are the employer taxes that will be refunded.

The business return is amended to match the ERC filing, the same as would have been done contemporary to the provision. That way, employment wages and taxes and nonconforming state reporting will happen to match the amended 941s for that year.

Remember, this is not an income tax issue and not a business tax credit.

[qbteachmt]

There is a time limit for amendment.

https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/retroactive-filing-for-employee-...

[sjrcpa]

15% is cheap. 😉 I've seen 25-30.

[IRonMaN]

I guess I don't live right ----------------- but then again, I do have some ethics and a conscience. 😬