Organizations can still apply for the Employee Retention Credit (ERC) by modifying their Form 941-X for the quarters in which they were eligible employers. The Employee Retention Credit is a tax credit that eligible businesses can use to cover some of their payroll taxes. It is not a loan and no repayment is required. The IRS will notify you if the credit you requested changes or if the amount available as a credit on Form 941 or Form 944 was reduced due to non-payment of taxes, penalties, or interest.
The credit is refundable if the employer does not have enough Medicare taxes during the coverage period to cover the subsidy and the amount of the credit is equal to the amount that the eligible person (employee) would have had to pay otherwise. If you overreported taxes on Form 941 and chose to apply the credit to Form 941 or Form 944, file an adjusted return on Form 941-X shortly after discovering the error, but more than 90 days before the statute of limitations for the credit or refund on Form 941 expires. However, for employers who have discovered that they may have left unclaimed credits, perhaps due to the lack of benefit allocations related to qualified sick or family leave or the Employee Retention Credit (ERC), the time of the modification has a definite expiration date. If you applied for the Employee Retention Credit on your original Form 941 for the quarter and you make any corrections on Form 941-X for the quarter to the amounts used to calculate this credit, you will need to recalculate the amount of the credit using worksheet 4.You must check the box on line 2 if you have a credit (a negative amount on line 2) and the limitation period for the credit or refund on Form 941 will expire within 90 days of your filing date on Form 941-X.
Adjustments to qualified health plan expenses attributable to the Employee Retention Credit are listed on Form 941-X, line 31a. If you didn't check the box on line 18b of the Form 941 you originally filed, but are now applying for the Employee Retention Credit as a recovering startup, check the box on line 31b. The choice and determination of the amount of credit that will be used to cover the employer's participation in Social Security tax are made on Form 6765, Credit for Increasing Research Activities. If you are another external payer who did not file Schedule R (Form 94) along with Form 941 because you did not meet these requirements, but who now file Form 941-X to declare these credits or deferral of employer or employee participation in Social Security taxes for your clients, you must now file Schedule R (Form 94) and attach it to Form 941-X.Originally, the CARES Act provided that, for employers with more than 100 employees, the credit was only available for wages paid to employees for whom services were not provided (that is, credits for qualified sick leave allowed an eligible employer to reduce their payroll tax by the amount of sick time paid to employees who were unable to work (or telework) because they were subject to a government isolation order, a healthcare provider had recommended that they be quarantined or if they had symptoms of COVID-19 and were seeking medical diagnosis).If you want to claim your Employee Retention Credit, you must file an amended return using Form 941-X.
You must check the box on line 2 if you have a credit (a negative amount on line 2) and the limitation period for the credit or refund on Form 941 will expire within 90 days of your filing date on Form 941-X. If you didn't check the box on line 18b of your original Form 941 but are now applying for this credit as a recovering startup, check box 31b. The choice and determination of how much credit will be used to cover your employer's participation in Social Security tax are made on Form 6765, Credit for Increasing Research Activities. If you are another external payer who did not file Schedule R (Form 94) along with your original Form 941 because you did not meet these requirements but now file Form 941-X to declare these credits or deferral of employer or employee participation in Social Security taxes for your clients, you must now file Schedule R (Form 94) and attach it to your amended return. If you overcharged employees' Social Security and Medicare taxes or need to reimburse them for any other reason related to this tax credit, make sure that they authorize it in writing. Affirmatively state that they authorize you as their employer to request a refund for any overpayment of their share in taxes. Schedule your free Employee Retention Credit consultation today and see how your company can apply for this tax credit.
