ERC Credit Help

[Terry D EA]

A general random question. As I read all of the info on this credit which is overwhelming to say the least, I realize what the employer who received the credit has to do. As an example;

Employer A - for tax year 2020 has qualified wages of 800,000.00. Credit is 50% so $400,000.00 in wage reduction. If employer A did not reduce the wages on form 941 for the affected periods, they must file form 941X to amend the wage deduction. Also, if Employer filed form 1120S with the full wage deduction and did not reduce the wages by the credit amount, form 1120S MUST be amended also.

Am I correct in my thinking so far? I have a client that receive large amounts of the credit but were not told to reduce anything and of course, here it comes.

FYI- This is a major battle with one of the national payroll processing companies. I have asked the bookkeeper to get a copy of all of the 941 forms filed and any 941X forms, ERC calculations to check everything against the tax returns for both 2020 and 2021. The bookkeeper was told 941s were not available and because they were a certain type of employer the 941 wasn't used. That blew my mind as I have no idea what the hell that means. I don't care who this employer uses or what the company classifies them as, they are not exempt from filing 941 forms. This company has over 4 mil in payroll each year. I just want to be sure my thinking so far is in the right direction as I will openly admit I am not an expert in the ERC area.

[Lee B]

The only exception I can think of would be if they are using a Professional Employer Organization for all of their payroll responsibilities,

in which case there special rules regarding how the ERC is reported.

[Medlin Software, Dennis]

943?

[DANRVAN]

8 hours ago, Terry D EA said:

If employer A did not reduce the wages on form 941 for the affected periods, they must file form 941X to amend the wage deduction.

Wages are not reduced on form 941, just the employer's deposit liability by the credit.

 

8 hours ago, Terry D EA said:

if Employer filed form 1120S with the full wage deduction and did not reduce the wages by the credit amount, form 1120S MUST be amended

That is true to prevent a double benefit.

[Terry D EA]

21 hours ago, Medlin Software, Dennis said:

943?

No, doesn't apply not farm workers

<<<<<<Wages are not reduced on form 941, just the employer's deposit liability by the credit.>>>>>> Thanks for correcting me. You are correct. For form 1120S, it would have to be amended to reflect the credit amount taken against the PR liabilities as well correct?

 

[DANRVAN]

16 minutes ago, Terry D EA said:

For form 1120S, it would have to be amended to reflect the credit amount taken against the PR liabilities as well correct?

 

That is correct. 

I am curious, are these 1120-S returns that you prepared?

[Terry D EA]

Yes, I did prepare those returns. I had no idea until recently the client had applied for the ERC. Their payroll company is Paychex which is a pain in the %^$ to work with. Their software is ridiculous to navigate. The company gave me access one year and it took me forever to find copies of the 941's that were filed. Not saying anyone has done anything wrong. I think they got the ERC retroactively which means there are some adjustments needed with the 941 and 1120S as well.

I'm not sure when they got the refund check, I'm thinking sometime in 2023. The bookkeeper called me and asked me "where do we record this income?" Well, I stated it is not income per say, so create an asset account to put it in for now and leave it there until we determine how much has to be paid back due to the adjustments that need to be made.

Apparently Paychex got on the contingency bandwagon. Their fees, like others, were deducted from the refund. I almost can't wait to see the P&L to see what they charged for this. Paychex is not cheap, this company has anywhere between 95 to 125 employees at any given time. Paychex charges this company in the middle five digit figures for their services annually. 

[Lee B]

Wow Paychex is not cheap. My largest client has 60 employees and pays a bit less than $5,000 a year with iSolved.