Are you wondering how to implement the Employee Retention Credit (ERC) in QuickBooks Online? As a subscriber to the QuickBooks Online (QBO) payroll community, our accounting services team has prepared this guide to help you implement the ERC in your payroll software. The ERC was created under the CARES Act to assist companies that have been adversely affected by COVID-19 in retaining their employees. When registering the ERC, it must be recorded as a credit to grant income and as a debit for accounts receivable. If your organization received the credit as prepayments, the refundable advance obligation will be credited and the cash will be debited.
In the tax return, the ERC refund is treated as income from grants or other income if the requirements are met; for non-profit entities, it is required to declare the ERC as income. It is important to understand when credit should be recognized as income and the appropriate accounting treatment and disclosures regarding credit recognition. There are specific criteria for this program, so organizations should carefully consider whether they meet the requirements for this credit. For example, you can contact certain companies, such as ERC Today, to help you understand and organize this information.
Government program laws and regulations, such as the employee retention credit created by the Coronavirus Relief, and Economic Security Act (CARES), are complicated and open to interpretation. We hope that these points will help you determine how to accredit the ERC in your company and how to represent the reward in your reports. If a company follows IAS 20, it has the option of declaring the employee retention credit as income or net of qualifying costs. For those who were able to obtain this credit, it is best that they have a good understanding of how to account for it.