The ERTC is a refundable credit that companies can request on qualifying salaries, including certain health insurance costs, paid to employees. When you complete line 16 of Form 941, Form 941-SS, or Schedule B, you are accounting for the non-refundable portion of the credit. This applies to family leave and sick pay for an entire quarter. It includes the employer's share of Medicare taxes and health plan expenses that go toward those salaries.
With ERC, the non-refundable part is equivalent to 6.4% of the salary. This is the part of the Social Security tax that the employer pays. You can apply for the ERC if you overreported taxes on previous Form 941 filings. This is done using Form 941-X.
The term “non-refundable” is incorrect if the company has not claimed the ERC. If the employer paid its share of Social Security tax through federal deposits, then the non-refundable section of the employee withholding tax credit can be recovered. This is explained in line 18 of the instructions on Form 941-X. The employee retention tax credit is one of those credits for which companies may need to modify their forms.
To apply for this credit, businesses must complete a separate Form 941-X for each Form 941 that they need to modify. They must also show the date they realized that the original form was incorrect. You must complete a separate Form 941-X for each Form 941 that you need to modify. You fill in the company information on each page, indicating in the upper right corner the return you are correcting.
You must also show the date you realized that the original form is incorrect. You have three years from the original filing date of Form 941 to file Form 941-X applying for the ERC. The employee retention credit was a refundable tax credit that small businesses could apply for during the COVID-19 pandemic. It provided some relief to struggling companies, which kept their employees on their payrolls even when government restrictions due to the pandemic forced them to suspend operations or affected their gross revenues.
Employers still have time to apply for a payroll tax refund by applying for the Employee Retention Tax Credit (ERTC). The ERTC was created under the CARES Act to offer refundable credit to certain employers who continued to pay workers during the pandemic. If a company received a PPP loan, the payroll costs used to obtain the forgiveness of that loan are not eligible for the ERTC. The IRS has also clarified that tips can be considered qualifying salaries for the purposes of the ERTC, as long as they are Medicare salaries.
Disaster loan counselors can help your business with the complex and confusing employee retention credit (ERC) and employee retention tax credit (ERTC) program. The ERTC is fully refundable even if the payroll taxes paid by the employer during that quarter are lower than the credit.