Understanding the ERC Filing Process
Whether you've already received your Employee Retention Credit (ERC) refund or are still considering if your business is eligible, it is crucial to be aware of every step of the filing process. The ERC has served as a lifeline for tens of thousands of businesses across the country during the COVID-19 pandemic.
However, many business owners are not aware that the ERC filing process doesn't end once the refund check arrives. According to the IRS, skipping the next steps could put your business at risk of penalties in the future.
How to File Your ERC Refund
The ERC refund was introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. To be considered qualified for the ERC, employers must meet one of the following qualifications during an eligible quarter:
- Experienced a significant decline in gross receipts
- Fully or partially suspended due to governmental mandates
Once you have reviewed the ERC qualifications and determined that your business may be eligible, you must submit Form 941-X for the eligible quarters in 2020 and 2021 to the IRS. This form allows you to adjust your previously submitted quarterly tax return and claim the ERC refund.
Deadline for Filing the ERC
Although the ERC program expired in September 2021, qualified businesses can still submit Form 941-X and retroactively receive the ERC refund. According to the IRS, the deadline to submit Form 941-X for eligible quarters in 2020 is April 15, 2024. Similarly, the deadline to claim ERC funds for eligible quarters in 2021 is April 15, 2025.
Next Steps After Receiving Your ERC Refund
It is important to note that ERC refunds are taking anywhere from 4-12 months to be received by employers. Many business owners are unaware that there are additional steps that need to be taken after the checks arrive in the mail. According to IRS guidelines, amending your business's returns, and possibly your individual returns, must be filed as soon as possible after receiving your ERC refund to avoid penalties.
Impact on Personal Returns
If your business operates as a corporation, specifically an S-Corp, Partnership, LLC, or Sole Proprietor, your personal returns will need to be amended due to the ERC refund. The personal returns of the following individuals will be impacted:
- All S-Corp members
- All partners in a partnership
- All members of an LLC
- Sole proprietors
Impact on State Returns
After your federal amendments are accepted, you may need to amend your state income tax returns as well. Depending on your state's requirements, the ERC refund may reduce the amount of wages deducted from your taxable income, potentially resulting in an increased amount of state-taxable income.
Conclusion and Next Steps
It is crucial to find a trusted partner who fully understands the ERC program and is committed to helping your business navigate the filing process. At StenTam, we take a proactive and compliance-first approach to tax planning. Our technology-enabled tax solutions provide accurate, compliant, and hassle-free tax filings, giving you peace of mind.
Reach out to one of our team members today to learn more about amending your federal, state, and personal returns after receiving your ERC refund.
The post Received Your ERC Refund? Here Are Your Next Steps. appeared first on StenTam.
By: Tom Kerr
Title: Received Your ERC Refund? Here Are Your Next Steps.
Sourced From: stentam.com/erc-refund-next-steps/
Published Date: Fri, 11 Aug 2023 22:32:58 +0000