These FAQs are not included in the Internal Revenue Bulletin and therefore cannot be relied upon as a legal authority. This means that the information cannot be used to support a legal argument in a court case. An employer that receives a tax credit for qualified wages, including the attributable expenses of the qualified health plan, does not include the credit in gross income for federal income tax purposes. Neither the part of the credit that reduces employment taxes applicable to the employer nor the refundable part of the credit are included in the employer's gross income.
The client employer is responsible for avoiding a “double benefit” with respect to the employee retention credit and the credit under section 45S of the Internal Revenue Code. The client employer cannot use the wages that were used to claim the employee retention credit and declared by the third-party payer on behalf of the client employer to request the $45 credit on their income tax return. Any eligible employer can choose not to apply the employee retention credit for any calendar quarter by not requesting the credit on the employer's payroll tax return. The ERC refund is not taxable when it is received; however, salaries equal to the ERC amount are subject to expense dismissal rules.
Small employers receive greater benefits under the ERC regime. Specifically, for as long as they are an eligible employer, they can include wages paid to all employees. Large employers can only include salaries paid to employees for not providing services. Technically, yes, but you only pay salaries that meet the requirements while the terms of office are in effect and have a more than nominal impact on the company.
Instead, the employer must reduce wage deductions on their income tax return for the tax year in which they are an eligible employer for the purposes of the ERC. The employee retention credit is a fully refundable tax credit that eligible employers request to cover certain payroll taxes. It's not a loan and doesn't have to be repaid. For most taxpayers, the refundable credit exceeds the payroll taxes paid in a credit-generating period.
While an employer cannot include salaries financed by a PPP loan in the ERC calculation, PPP funds only apply to eight to ten weeks of wage expenses. ERC eligibility periods are longer. PPP loans can also finance non-wage expenses. No, but, if possible, allocate the maximum allowable non-wage costs to the waiver of the PPP.
It is likely that the fund's sister holding companies can be treated as separate operations or businesses when considering the status of an eligible employer, since the Fund owned by the holding companies is not an active operation or business (rather a passive investment vehicle). Cherry Bekaert LLP and Cherry Bekaert Advisory LLC practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws, regulations and professional standards. Cherry Bekaert LLP is an independent, certified public accounting firm that provides certification services to its clients, and Cherry Bekaert Advisory LLC and its subsidiaries provide tax and business advisory services to their clients. Cherry Bekaert Advisory LLC and its subsidiary entities are not authorized public accounting firms.
The entities that belong to the Cherry Bekaert brand are independently owned and are not responsible for the services provided by any other entity that provides services under the Cherry Bekaert brand. Our use of the terms “our firm” and “we” and terms of similar meaning denote the alternative practice structure of Cherry Bekaert LLP and Cherry Bekaert Advisory LLC. The employee retention credit under the CARES Act encourages companies to keep employees on their payroll. As a company that acts as an employer, the credit you receive from the government through the ERC is not included as gross income in your federal income taxes.
If your company experienced partial or total closures as a result of government orders during COVID-19, you may be eligible to receive the ERC. If an eligible employer uses an uncertified PEO to declare and pay its federal payroll taxes, the PEO must declare the employee retention credit on an aggregated Form 941 and separately declare the employee retention credit attributable to employers for whom it submits the added Form 941 in the attached Annex R. IRS delays in processing amended returns can create a dilemma for taxpayers: they may have to reflect an ERC on a return and, therefore, increase taxable income before receiving a check. In fact, a taxpayer can file a modified payroll tax return in a later tax year, but they will have to apply the dismissal of wage expenses in the year to which the ERC request relates, and not when the ERC request is filed or when the funds are received.
Since the ERC is a payroll tax credit, not an income tax credit, you can still receive an ERC credit even if you didn't pay any income tax in the year you qualified. Since the ERC filing period has passed, you must file an amended return using Form 941-X to apply for any credit you may be eligible for. The third party payer is not entitled to the employee retention credit with respect to the wages that it remits on behalf of the employer (regardless of whether the third party is considered an employer for the purposes of the Internal Revenue Code (the Code)). If you have any questions about the ERC or its impact on you or your company, please contact GHJ's tax advisors.
Section 280C (a) of the Code generally does not allow a deduction for the portion of the salary paid equal to the sum of certain credits determined for the tax year. By not mentioning any COVID-19 relief program, other than the three listed above, the guide implies that grants or loan forgiveness from any other program will continue to be counted as gross income for the ERC. If an eligible employer uses a CPEO or a 3504 agent to declare their federal payroll taxes on an aggregated Form 941, the CPEO agent or 3504 will declare the employee retention credit on their aggregated Form 941 and in Annex R, Assignment Program for those who file the Aggregate Form 941, which you have already filed. .