In order to claim the Employee Retention Credit, eligible employers are to report their total qualified wages for each quarter on their quarterly payroll tax returns. For most employers, this will be Form 941, beginning with the second quarter of 2020. The credit itself is taken against the employer's share of Social Security Tax but the excess is refundable as an overpayment under normal procedures. Beginning quarter 3 of 2021, the credit is taken against the employer's share of Medicare Tax; the excess is still refundable as an overpayment.
In the early days when the ERC was just making its way to the forefront, employers were able to retain a corresponding amount of the employment taxes that otherwise would have been deposited. Including federal income tax withholding, the employees' share of Social Security and Medicare taxes, and the employer's share of Social Security and Medicare taxes for all employees, up to the amount of the calculated credit, without incurring a penalty. Those employers reducing their deposits were able to reconcile on the affected quarter's Form 941. Eligible employers were also able to request an advance of the Employee Retention Credit by submitting Form 7200; this method was discontinued in 2021.
Today, in order to retroactively claim the credit, employers must first calculate their total credit for each respective quarter/year that qualified and amend the associated Form 941. While this may seem like a daunting task, not applying for the retention tax credit is the equivalent of leaving tens of thousands of dollars on the table that is rightfully owed to you. In many cases, we are seeing employers receive hundreds of thousands of dollars back from the Federal Government.
ERT Credit recently worked with a manufacturing company in California that suffered greatly due to the pandemic. The manufacturer believed they could not qualify for the ERC because they had received both PPP loans. After being recommended to us by a colleague, we were able to communicate directly with leadership at the manufacturing company and inform them that given the facts, the ERC was a home run for them in terms of both eligibility and their forecasted credit. When the dust settled, they walked away with $1.7 million dollars.
ERT Credit is a leader in the industry when it comes to calculating and submitting for the Employee Retention Credit. ERT Credit provides justification via IRS guidelines to claim the ERC, calculates the credit for each qualified quarter, and provides amended Form 941(s) with instructions on where to mail the completed forms. Your commitment is all of 10 minutes — no heavy lifting is required on your end.