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 is requested in federal payroll tax returns (Form 94), depending on the quarter in which the payroll costs were paid. 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. Congress approved programs to provide financial assistance to companies during the COVID-19 pandemic, including the Employee Retention Credit. The ERC provides eligible employers with per-employee credits based on qualified wages and health insurance benefits paid.
When registering the ERC, 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. The ERC is designed to keep employees on the payroll and out of the unemployment office. Businesses that were closed, even partially, due to a government order (regardless of whether it was state, local, or federal) may qualify for the credit. To take advantage of this credit, organizations must understand how to account for it.
The ERC covers overtime, regular time, and company contributions to health care, so you'll need to include each of these items in your payroll and then run QuickBooks Payroll. There are some common mistakes businesses should avoid when accounting for this credit or applying for it retroactively. For-profit entities must follow GAAP guidelines when accounting for the ERC and consider calendar issues that may arise. Additionally, entities must consider whether the presentation is misleading and must make an appropriate disclosure about the nature and amount of credits their company received. If you know that you are eligible to accept credit, you must first set up your payroll to accept it. Any uncertainties related to qualifying for the ERC should be evaluated to determine if the credit application is likely.
By applying IAS 20, for-profit entities do not recognize the ERC until the reasonable guarantee threshold related to the terms of the ERC and receipt of credit is met. Businesses can record receivables for credits they are eligible for but have not yet received or debts for credits received before incurring related payroll costs. For example, if your company had to reduce its working hours due to a government order, you may still be eligible for the credit. You can contact certain companies, such as ERC Today, to help you understand and organize this information. This comprehensive report analyzes changes in child tax credits, earned income tax credits, child and dependent care credits caused by expiration of provisions of United States Rescue Plan Act; ability to electronically file more returns in Form 1040 series; deductions for car miles; alternative minimum tax; gift tax exemptions; strategies to accelerate or postpone income and deductions; and retirement and wealth planning.