If you haven't yet applied for your qualifying wage tax credits and you're applying for the Employee Retention Credit (ERC) retroactively, you'll need to file either IRS Form 944-X or 943-X. The form you need depends on the type of company you have. The ERC was created to encourage employers to keep employees on the payroll even if they weren't working during the period covered due to the effects of the coronavirus outbreak. To apply for the ERC, you'll need to file a series of tax forms, starting with IRS Form 941, which is your quarterly federal tax return, for the quarters in which you paid salaries that were eligible for the ERC. Instead of claiming a deduction on their income tax return for the tax year in which they are an eligible employer for the purposes of the ERC, businesses must reduce wage deductions.
To apply for the ERC, businesses must file an amended Form 941X (Quarterly Federal Payroll Tax Return) for the quarters in which they were an eligible employer. The ERC is a refundable tax credit that business owners can receive for keeping employees on the payroll during the COVID-19 pandemic. For more information on the Employee Retention Credit, visit Cherry Bekaert's ERC Guidance Center or contact Martin Karamon. An accountant, tax professional or specialist specializing in ERC can help you determine what documents you must submit to obtain the credit and how to complete the correct tax form for your company. Keep in mind that these forms modify the payroll tax return documents that you already filed at the end of the corresponding quarter.
You can only apply for the ERC on your payroll tax return, not on an income tax return. If employers delayed payroll taxes before receiving the ERC in the fourth quarter, they had to determine any underpaid tax amounts and prepare to resolve those problems. From now on, the only way to apply for the ERC is to file an amended Form 941X (Quarterly Federal Payroll Tax Return) for the quarters in which they were an eligible employer. The amount of credit businesses can receive is based on qualifying wages paid to employees during their status as an eligible employer. However, it's important to note that the refund you receive from the ERC does affect deductible wages for the tax year in which you paid salaries that qualify for the ERC.