The ERC is not a tax. It's a refundable tax credit for the salaries of qualifying employees. Applying for the employee retention credit is easy and requires only a few simple steps to receive the refund. The IRS has just published a new guide that affects the calculation of the employee retention credit (ERC).
While the refund is not taxable under article 280C of the IRC, the amount of the credit creates a reduction in salary that matches the amount of the credit. You don't enter the credit that reduces applicable labor taxes to the employer or include the refundable part of the credit. The employee retention credit under the CARES Act encourages companies to keep employees on their payroll. FAQ 86 states that employers who receive a tax credit for eligible wages and health care expenses do not include the credit in their gross income for federal income tax.
