ERTC was an incentive for employers to keep employees on payroll during the pandemic’s economic swings from March 13, 2020 to September 30, 2021. The Infrastructure Investment and Jobs Act retroactively terminated the ERTC for wages paid after September 30, 2021 for all eligible employers other than certain “Recovery Startup Businesses” for which it extends further to December 31, 2021.
To be eligible, an employer needs to either have a fiscal quarter with either (1) full or partial suspension due to government order due to COVID-19, or (2) a significant decline in gross receipts compared to the same quarter in 2019 (>50% decline for a quarter in 2020, >20% decline for a quarter in 2021). An eligible employer may be entitled to an ERTC up to $5,000 per employee for qualifying wages paid in year 2020 and up to $7,000 per employee for qualifying wages paid per applicable quarter of year 2021. An employer that received a Paycheck Protection Program (PPP) loan can claim the ERTC for any qualified wages paid to employees if the employer is an eligible employer that meets the requirements for the ERTC. However, qualified wages for which the employer claims the ERTC are excluded from payroll costs paid during the covered period that qualified for forgiveness under the PPP.
To claim the ERTC in 2023, an employer files Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, for the previously unclaimed 2020 and 2021 quarters. Because these credits require an amended filing, the deadline for claiming 2020 credits is less than a year away—April 15, 2024—while there is more time for claiming 2021 credits which are due by April 15, 2025. In addition the taxpayer should file an amended income tax return or administrative adjustment request, if applicable, for the tax year in which the qualified wages were paid or incurred to correct any overstated deduction taken with respect to those same wages on the original federal tax return.
If you are unsure if you qualify for ERTCs or would like a second opinion, Walter Haverfield’s attorneys provide thorough legal support and guidance and are willing to assist you and your business.
Sebastian Pascu is a Partner and Theodore Czaplicki is an Associate with the Walter Haverfield Tax and Wealth Management Group, focusing work on transactional matters and tax matters. They can be reached respectively at (216) 619-7870 or email@example.com and (216) 619-7885 or firstname.lastname@example.org.