Wondering how to implement the employee retention credit in QuickBooks Online? As a subscriber to the QuickBooks Online (QBO) payroll community, our accounting services team prepared the following guide to help you implement the employer retention credit (ERC) in your payroll software. As you may have heard, the ERC is requested in federal payroll tax returns (Form 94), depending on the quarter in which the payroll costs were paid. With this in mind, organizations that use third-party payroll providers, such as QBO, to prepare and file payroll statements should take steps to implement this credit once they determine their eligibility. This includes configuring your payroll to accept and track credit “in real time”.
Congress approved programs to provide financial assistance to companies during the COVID-19 pandemic, including the employee retention credit (ERC). The ERC provides eligible employers with per-employee credits based on qualified wages and health insurance benefits paid. When registering the employee retention credit, it must be recorded as a credit to grant income and as a debit for receivables. If your organization received the credit as prepayments, the refundable advance obligation will be credited and the cash will be debited.
We'll cover everything you need to know about ERC accounting and who you can contact for more information. IAS 20 allows you to record and present the gross amount as other income or to offset the credit with related payroll expenses. In this situation, you may consider deferring the implementation of the ERC in QBO until a plan is established to maximize funding for ERC and PPP loans and, instead, choose to file the amended returns at a later date. The AICPA has not published a technical question and answer (TQA) on ERC, as it did with PPP loans and grants for closed facility operators, but readers can consult these TQs for analogies when accounting for ERC.
Using either of these methods, entities must consider whether the presentation is misleading and must properly disclose the nature and amount of the credits that their company received. For example, if your company had to reduce its working hours due to a government order, you may still be eligible for the credit. If a part of your business was considered non-essential and was affected by a government order, there is a chance that you may be eligible to receive credit. The architecture of your company, the size of your workforce and the reason why your company may or may not close influence the possibility of obtaining this credit.
For many business owners, the tax credit mentioned above would be a better option than some of the best-known relief bills, loans, and grants. For example, many companies believed that they did not qualify for this credit because they had previously requested funds from the Paycheck Protection Program (PPP). Another topic to consider is how the ERC will affect other aid programs, such as Check Protection Program (PPP) loans. The ERC will also help business owners to keep their employees on the payroll and to apply for unemployment benefits to minimize the number of workers.
The ERC, or employee retention credit, is a refundable tax credit under the CARES Act for eligible employers who have experienced a significant decrease in gross income or certain closures due to COVID-19. The document includes general information on the ERC and a practical guide for applying the two accounting models and the presentation and disclosure of financial statements. .
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