Qualifying wages paid prior to October 1, 2021, can still be used to claim the ERTC for applicable quarters and time periods, assuming the gross receipts or government shutdown tests are met. Employers may claim up to $5,000 per employee in 2020, and up to $7,000 per employee per quarter in 2021 (excluding Q4 2021), for a total potential ERTC for all qualifying quarters of $26,000 per employee.
In addition, employers that received Paycheck Protection Program (PPP) loans are eligible to receive the ERTC.
Due Date for Claiming ERTC and Amending Payroll Tax Returns
The ERTC for 2020 and 2021 may be claimed on an amended quarterly payroll tax return (Form 941X). Each quarter must be amended on a separate form. After the IRS processes Form 941X, a check is issued to the taxpayer for the credit amount. The statute of limitations for filing amended payroll tax returns is three years from the due date of the return. For example, to apply for the Employee Retention Tax Credit for the 2nd quarter of 2020, the amended return must be submitted by July 2023. As a result, there is still time to apply for the ERTC.
Wages used to claim the ERTC cannot be deducted on a tax return. Therefore, filing an 941X after a tax return has been filed for 2020 or 2021 will require the filing of an amended tax return (corporate, partnership or S – Corporation) because wages used to calculate the ERTC are disallowed as a tax deduction in 2020 and 2021.
It should be noted that the IRS has up to 5 years to audit the amended Form 941X returns and the supporting information.
Interaction of ERTC and PPP
Initially, the CARES Act prohibited an employer to receive both a PPP loan and the ERTC. The CARES Act was revised to permit employers to receive both, however, an employer cannot claim the ERTC for wages that were paid with PPP loan proceeds. The IRS has issued guidelines regarding the interplay of the ERTC and PPP. In addition, there are strategies that can be used to maximize the benefits of both opportunities.
RVG & Company can assist in evaluating your company’s potential to claim the ERTC for 2020 and 2021. While there are several factors and qualifications to consider, the credit can provide a significant benefit as the economy unwinds from the impact of COVID-19. If you would like to discuss any of the provisions contained in the President’s latest tax proposal, please contact RVG & Company at 954.233.1767.
2020 RVG & Company