The Filing Process of the Employee Retention Tax Credit

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The Employee Retention Tax Credit (ERTC) was created just over a year ago as part of the CARES Act, but it wasn’t until it was enhanced and expanded as part of the Consolidated Appropriations Act of 2021 (CAA) that we started seeing so many clients take advantage of or ask questions about it. We highlighted the mechanics behind the credit and the eligibility in several earlier articles linked here:

  1. Initial ERTC rollout/criteria
  2. ERTC enhanced benefits for 2020
  3. ERTC extended into 2021

Once taxpayers are able to weed thru the myriad of rules and guidelines of eligibility, the next question asked is “How do I claim the credit?” Taxpayers who qualified for the ERTC in 2020 must amend Form 941 for the each respective quarter in which they qualify and wish to claim the credits. Unfortunately, you must file a separate Form 941-X for each quarter that you are claiming the credit (though credits claimed on wages paid from March 13, 2020 to March 31, 2020 are claimed on the 2nd Quarter 941 for 2020). Some employers may need to file Form 941-X for Quarters 2, 3, and 4 for 2020.

Employers that qualify and wish to claim the ERTC for first quarter of 2021 should complete Worksheet 1 included with the instructions for Form 941 and report the nonrefundable portion of the credit on Line 11c and the refundable portion of the credit on Line 13d. Employers that have excess ERTCs may choose to have those credits refunded or applied to future payroll tax returns.

There still are many unanswered questions regarding the ERTC. We urge our clients to use caution before filing to claim ERTCs. Form 941-X may be filed to claim credits within 3 years of the date the original Form 941 was filed or 2 years from the date the employer paid the tax reported on Form 941, whichever is later. With that lengthy window, one course of action may be to wait for additional guidance on eligibility before claiming ERTCs.

For more information or a discussion on how this may impact you, please contact your BNN advisor at 800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.