Employers that received ERTC credit for 4th Q have until year’s end to repay without penalty

By Benjamin R. Bostic

When the federal government recently halted the Employee Retention Tax Credits (ERTC) a quarter early, some businesses had already received advanced payments or reduced payroll tax deposits during the fourth quarter of 2021 in anticipation of being ERTC eligible.

The IRS recently said businesses have until Dec. 20 to repay advanced payments. Additionally, employers who reduced their payroll tax deposits on wages paid between Oct. 1 and the end of the year may have penalties waived for deposits due before Dec. 20.

Though the ERTC program ended on Sept. 30, employers still have the opportunity to claim credits – though claiming the credits could result in additional taxes.

Employers can file Form 941-X up to three years from the due date of the originally filed 941 to claim the credit for eligible periods between April 1, 2020, through Sept. 30, 2021.

However, while the credit is not taxable, claiming it does result in expense disallowance of wages equal to the credit – meaning the reduction in expenses increases overall taxable income. Business owners seeking to receive the credit for 2020 may have to amend their return to show reduced expenses in the amount of the credit received.

An ERTC refresher

In 2021, ERTC is available to businesses with fewer than 500 employees and meet specific revenue reduction requirements or had to fully or partially shut down due to government order. The program allows qualifying businesses to receive tax credits up to $7,000 per employee per quarter.

These credits are only available for the first through third quarters of 2021.  The credit can also be claimed during the second through fourth quarters of 2020.

Earlier this year, the IRS released guidance on how businesses can use the ERTC program to cover certain payroll costs that exceeded money received under a Paycheck Protection Program (PPP) loan. If a business does not receive PPP loan forgiveness, it can also use ERTC to cover allowed payroll expenses.

For more information on the IRS’ guidance on the ERTC program, click here and here.

Looking ahead

The guidelines surrounding federal COVID-19 relief programs are complex and the Boyer & Ritter team is ready to help.

To learn more about engaging us for business relief assistance, please contact us here.

Benjamin R. Bostic, CPA, is a principal at Boyer & Ritter with experience providing tax and accounting services for closely-held businesses, individuals, not-for-profit organizations. Reach Ben at 717-264-7456 or bbostic@cpabr.com