Wondering how to implement the employee retention credit in QuickBooks Online? As a subscriber to the QuickBooks Online (QBO) payroll community, our accounting services team prepared the following guide to help you implement the employer retention credit (ERC) in your payroll software. As you may have heard, the ERC is requested in federal payroll tax returns (Form 94), depending on the quarter in which the payroll costs were paid. With this in mind, organizations that use third-party payroll providers, such as QBO, to prepare and file payroll statements should take steps to implement this credit once they determine their eligibility. This includes configuring your payroll to accept and track credit “in real time”.
The employee retention credit is a positive step in alleviating this coronavirus pandemic, which is a type of tax that is credited to employers. You can record the employee retention credit in QuickBooks by following a few steps. It is fully refundable and is equivalent to 50% of qualifying salaries and the allowable expenses of the qualified health plan are also included. The Employee Retention Credit (ERC) was created under the CARES Act to help companies that have been adversely affected by COVID-19 retain their employees.
For those who used the ERC, it is important to understand when credit should be recognized as income and the appropriate accounting treatment and disclosures regarding credit recognition. IAS 20 allows you to record and present the gross amount as other income or to offset the credit with related payroll expenses. Every quarter, when a company is reasonably certain that it meets the recognition criteria, it records an account receivable and other net income or expenses. In practice, the AICPA has seen more public companies that apply this model present the credit network, Durak said.
The ERC provides eligible employers with per-employee credits based on qualified wages and health insurance benefits paid. Once the entity has determined that the conditions have been met, it can recognize the employee retention credit as income for that period. The employee retention credit can be valuable for employers who are not eligible to receive the Paycheck Protection Program (PPP) loan or who have chosen not to receive it, but there are some factors to consider. Congress approved programs to provide financial assistance to companies during the COVID-19 pandemic, including the employee retention credit (ERC).
An entity can recognize income from the employee retention credit in the period in which it determines that the conditions have been substantially met, which will require an evaluation to determine if the credit application process is more than an administrative obstacle to receiving the credits or just an administrative obstacle to receiving the credits. Companies can record receivables for credits that they are eligible for but have not yet received, or debts for credits received before incurring related payroll costs.
