Understanding the Employee Retention Credit

The Employee Retention Credit (ERC) is a program approved by Congress to provide financial assistance to companies during the COVID-19 pandemic. It offers eligible employers a per-employee credit based on qualified wages and health insurance benefits paid. This credit is designed to help employers retain their employees and cover the costs of wages and health insurance benefits during the pandemic. According to the IRS, the amount of this credit must be recorded as a reduction in deductible payroll expenses. Companies can do this by classifying the ERC item as Gross Payroll Payment in the newspaper transaction.

IAS 20 allows companies 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. No, you don't need to provide the IRS with any documentation to support your request for the employee retention credit. Unlike the Payroll Protection Program (administered by the Small Business Administration), there's actually no “application process” for employee retention tax credits. Employers with more than 500 full-time employees can apply the ERC to qualified salaries paid to employees who weren't working for a quarter because the company suspended operations or had a significant decrease in gross revenues. If you're unsure if you qualify for the Employee Retention Tax Credit (ERC), this questionnaire will help you determine your eligibility. It will also connect you with an Occams tax expert who will provide you with a free consultation.

Additionally, if you received a refund check for the ERC, you can register it by creating a bank deposit. Let us help you record your employee retention credit (ERC) accurately in QuickBooks so that you can take advantage of this program and get back on track.