BLOG: Questioning about taxes for the ERTC? Right here’s what you should know

Cassidy Jakovickas.

For those who’ve learn any of my earlier articles in regards to the Worker Retention Tax Credit score (ERC), you realize that it’s one of the most lucrative tax opportunities lately. Nonetheless, as a result of the IRS is at present backlogged in processing the amended payroll tax returns on which the ERC is claimed, you could be questioning learn how to deal with the ERC in your tax return. On this article, I’ll clarify some ERC tax concerns to remember.

A fast recap on the way you declare the ERC tax credit score

For those who cross the gross receipts check or suspended operations test for 2020 or 2021, you’re an eligible employer for the ERC and may begin calculating your certified wages. In case you don’t know, certified wages are wages which might be countable whenever you’re calculating your ERC quantity. Right here is how that appears for 2020 and 2021:

  • 2020: It’s possible you’ll declare the ERC for as much as 50% of certified wages paid throughout your eligible intervals.
  • 2021: It’s possible you’ll declare the ERC for as much as 70% of certified wages paid in eligible quarters.

After calculating your quantity of certified wages, you should file an adjusted quarterly payroll tax return (Type 941-X) for every quarter wherein you’re eligible for the ERC tax credit score. 

Do you have to pay any further tax owed earlier than or after receiving your ERC credit score quantity?

As famous below Inside Income Code Part 280C, you should scale back your earnings tax deduction by your ERC credit score quantity within the tax yr for which you’re claiming the ERC credit score. For instance, when you certified for ERC in Q2 and Q3 2021 and your credit score was $50,000, your wage expense deduction in your 2021 tax return can be decreased by $50,000. Decreasing your earnings tax deduction might enhance your taxable federal earnings and earnings tax legal responsibility relying in your tax state of affairs. 

Be aware that you’re accountable for any further tax legal responsibility that outcomes from ERC-related changes, whether or not or not you’ve truly obtained your ERC refund verify. This extra tax legal responsibility could be a drawback when you’re ready to your ERC tax refund, which is more likely to be delayed for the reason that IRS is at present backlogged in processing amended quarterly payroll returns for ERC claims. If so for you, the IRS has introduced aid measures for you.

The IRS is providing penalty aid for ERC-related late tax funds

Based mostly on the steering in Notice 2021-49, the IRS has said you could obtain aid from the failure-to-pay penalty when you can reveal affordable trigger and that you weren’t negligent in your failure to pay on time. 

To study extra about figuring out your ERC eligibility, you’ll be able to learn “Are you overlooking the Employee Retention Tax Credit opportunity?” For those who’re trying to find an ERC skilled that can assist you declare this tax credit score, make sure you avoid ERC fraudsters. You’ll be able to at all times get skilled, reliable assist with the ERC from my staff and me at MBS Accountancy.

Cassidy Jakovickas, CPA, is president and CEO of MBS Accountancy Corp. in Downtown Fresno.

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