Employers must file Form 941, the employer's quarterly federal tax return, to start the Employee Retention Credit (ERC). This is a fully refundable tax credit that is equivalent to 50 percent of qualified wages (including allocable qualified health plan expenses) that eligible employers pay to their employees. To be eligible for the ERC, the employee must complete a quarterly payroll tax return form (Form 94) for each payroll period. Eligible employers will report their total qualifying wages and related health insurance costs for each quarter on their employment tax returns (generally, Form 941, Employer's Quarterly Federal Tax Return) for the applicable period.
Companies with 100 or fewer full-time employees may be eligible to receive a 100 percent wage credit for employees. Amendments can be submitted up to three years after the filing date of each quarterly payroll tax, resulting in a different deadline for applying for the ERC for each calendar quarter. The ERC can only be filed using IRS Form 941-X, “Adjusted Federal Tax Return or Employer Refund Request.” Tax advisors may be misstating the rules related to the deadlines for employee retention credit (ERC) applications. While the deadline for receiving the ERC was last October, companies can still submit an application retroactively by filling out a refund request form, also known as the employer's adjusted quarterly federal tax return (941-X).