Thank Candy! We had an ERC firm calculate the qualified wages and healthcare for our large business, but not provide us guidance on how to file the 941x. Your video was a life saver!!
@@natalieshaba7032 We have a few different paid options (as you can probably imagine, we have had lots of people reach out for help. I gave the overview as an example to help people so they didn't need to pay for assistance, but if we have to do specific numbers for someone, we do charge). We can do a consult for $250.00 where we walk you through the process to help you know where on the 941-X to put the information so you can file. If you want us to do the filings, we charge $500 per quarter if you have already determined qualified wages by employee. We charge extra to take the payroll info and determine qualified wages for each employee (taking into consideration anything used for PPP forgiveness, if applicable). If you are interested in any of these options, please contact my staff at 310-534-5577 or contact@abandp.com and they will help you through the next steps.
Candy, I just wanted to say thank you so much for your video and all of your help in the comments. With the guidance of your videos, I filed in April 2023 and got our first check this week! The process moved so quickly! We still are waiting for two more that we got letters for.
but remember it doesnt stop there.. you now likely must amend your income tax returns 2020/and/dor 2021 for the year of each ERTC.. ERTC counts as income in year of the retention credit.
Thank you! Just want to add the comments regarding not having enough info are not valid points, this video is just how to fill out the 941X which is the only part some of us need. We already know how to calculate the qualifying wages. Also appreciate you commenting on the questions as I had the same questions and now know the answers. Your amazing.
Great video that walks us through the process, step by step. Worked very well for me, just applying for the earlier quarters in 2021 and this still works great. Thanks again.
I'm so glad I was able to help you! If you know of any other business owners who need to claim the credit, please let them know about my videos. There are too many aggressive companies out there looking to take a large chunk of the credit, and I don't want that to happen.
@@CandyMesser @Candy Messer I didnot see that you calculated the nonrefundable portion for employer ss tax on wages earned march 13 - march 31 2020, do we not calculate that and include it on form 941X?
@@shurouqabuaita6957 The instructions don't ask you to do so. It asks for the wages reported on the original 941. It's to determine your employer's expense for Social Security wages originally reported on the 941. It is not calculated based on qualified wages. Keep in mind qualified wages for ERTC could be much less than the wages on the 941 as well, but you still must use the wages from the 941. I have done quite a few where the wages are significantly less for ERTC and there is no "refundable" portion of the credit because the "non-refundable" calculation is more than the ERTC credit. However, the amount that appears as the total ERTC is the credit you qualify for.
Candy & Team… thank you so much for this video and worksheet that you emailed me! After watching it I was able to recover $46,420.38 in ERTC for our small business (and saved $6,963.06 - 15% that a tax preparer wanted to charge us!) Thank you!
Hello Anya, I have that issue now, the company that was helping me, told me already that I qualify but they want me to pay in advance so the will. charge me. 10%. but if they will. deduct from my funds 15%. I am confused with the form because I found information only of form 7200 but it says is not longer available. I would appreciate if you help me in how getting the form.
Yay, I'm so glad you were able to use my information to help you claim the credit! Would you consider leaving this comment as a testimonial on Google or my business Facebook page? g.page/r/CXAeLk-LmOeMEAI/review OR facebook.com/AffordableBookkeepingAndPayroll/reviews Thank you!
Thank you for this video. I was having issues with the numbers coming out right, and realized from your video I had missed the "Non-refundable credit section".
I hope you can use my example to follow along with the steps. I don't know what period you are doing, but keep in mind the way to calculate has changed 3 times. So for 2020, you'll determine a 50% credit on up to 10,000 qualified wages per employee per YEAR. For 2021, you'll calculate 70% of qualified wages per QUARTER. And if you qualify for 3rd QTR 2021 (or 4th if you are a recovery startup business), you use Medicare wages instead of Social Security wages. It's s bit confusing for many which is why I created videos to help.
We are a small Episcopal church and just found out about this. We don’t have nor can we afford a cpa firm. With your easy to follow TH-cam, I think I can forgive out how to do the 941x. . As an accountant, I filled out many 941s. How do I know what quarters I can use? The time we were shut down? You are a lifesaver.
I'm glad my video was able to help you. There are 2 ways to qualify. One is to have a reduction of revenue (or in your case donations, etc). The other is to be under a government-mandated shutdown or reduction of services. Under the revenue reduction, a quarter in 2020 must have a 50% reduction compared to the same quarter in 2019. In 2021, the reduction in a quarter must be at least 20% compared to the same quarter in 2019. 2021 also allows a lookback of one quarter, so if the 1st quarter of 2021 didn't have a 20% reduction compared to the 1st quarter of 2019, but the 4th QTR of 2020 did compared to 4th QTR 2019, you can claim the 1st quarter 2021. If you qualify for 1st quarter 2021, you can also claim 2nd quarter 2021. If for the mandated shutdown, you can claim for the period you could not operate as usual. If shut down a full quarter, you can use the full quarter's qualified wages. If the mandate was lifted mid-quarter, you use the period up to the time you could resume regular activities. If you qualify for one reason for certain periods (such as shutdown) and the mandate is lifted but you can use the reduction of revenue in a quarter, that is fine. As long as one reason applies in a quarter, you can file.
Hi Candy. 2021 ERC question. Employee makes 2500 (social security wages) per each of 6 pay periods in the quarter. Health insurance is 1000 per month paid 900 by Employer and 100 by employee via pretax deduction. So qualified wages for the qtr are 18,000 less 10000 = 8000. The PPP coverage period includes 3 of these pay periods. The PPP forgiveness application (approved) did not include health ins, only payroll wages, no non payroll exp. Can I use 7650 of the 8000 towards PPP wages? (2500 + 50) x3 I read somewhere that Section 125 benefits like pre-tax health deductions (and HSA deductions) can be considered qualified wages for ERC in 2021 (added back to social security wages). I think the remaining employER portion of health ins in the 3 payrolls offset for PPP is still allowed even though the wages are used for PPP? I read somewhere an employer could submit health insurance exp even if no wages included for ERC (since offset for PPP) ? We have about 120 employees in 2021, Very picky questions! Thank you in advance !
I can't take the time to do the math for questions I receive (I get a lot in e-mail), but I can give you a general answer. We don't use Social Security wages to determine qualified wages and add back in pre-tax amounts. We use payroll summaries that give the total gross to determine qualified wages for the period (only up to 10,000 for 2020 total, 10,000 per quarter in 2021). Remember to remove any wages where a credit has been received, if any (such as paid sick and/or family leave, opportunity zones, etc). And of course, anything you used for PPP can't be used for ERTC. If you did not claim employer share of medical expense for PPP, you can for ERTC. I hope this answers your questions so you can determine your total qualified wages/ERTC.
Candy, I was reading the instruction for 941x, I read this part for line 17 Example-Nonrefundable portion of credit for qualified sick and family leave wages increased. Following Example-Qualified sick leave wages increased in the instructions for line 9, you originally reported a $1,000 nonrefundable portion of the credit for qualified sick and family leave wages on Form 941, line 11b, for the second quarter of 2020. You use Worksheet 1 to refigure the correct nonrefundable portion of the credit for qualified sick and family leave wages and you determine that the correct credit is now $2,000. To correct the error, figure the difference on Form 941‐X as shown. Column 1 (corrected amount) 2,000.00 Column 2 (Form 941, line 11b) - 1,000.00 Column 3 (difference) 1,000.00 To properly show the credit increase as a reduction to your tax balance, enter the positive number in column 3 as a negative number in column 4. Here is how you would enter the numbers on Form 941‐X, line 17. Column 1 Column 2 Column 3 Column 4 (corrected amount) (Form 941,line 11b) (difference) (tax correction) 2,000.00 1,000.00 1,000.00 -1,000.00 from Worksheet 1 Step 2, Nonrefundable portion of credit for qualified sick and family leave wages for leave is $527.54 so I enter this on line 17 column 1, However Form 941, line 11 b is also $527.54 Does that mean I don't need to fill line 17?
I'm so sorry I didn't respond earlier. I only saw a notification of your comment today. You DO NOT fill out a 941-X to claim sick pay if it was already claimed on the 941. You only fill out the worksheet and claim the credit if you are entitled to the credit but did not yet apply for it. Since the amount is on the 941 already, do not include it in your calculation worksheet/941-X.
This may have been answered as I didn't read all 700 comments 😊... I have all 941 forms filed per qtr from Q4 2019 to Q4 2021 that I am TRYING to address. My question is how did you break out Q1 2020 to get only 3/14/2020 - 3/30/2020 seeing as the filed 941 for Q1 2020 reflects 1/1/2020 - 3/30/2020. Also, when including Healthcare expenses that are paid partially by business -60% and 40% by employee, what number is reflected on the 941 x form? The total, the 60% or the 40%? Thank you so much for taking the time to make this video. It is clear, concise and an enormous help! Thank you again
When claiming March wages, you look at your payroll records (payroll summaries or add up amounts from each check) to get the gross PAID March 13-31 and add to the 2nd QTR 2020 return. You do not file a 1st QTR 2020 return. Secondly, you only include the employer portion of the healthcare expense, and only if not used towards PPP.
Dear Candy, Hi, Good morning! I would like to claim ERC program. But I had received PPP, too. When I put PPP into a quarter, it wasn't enough. (Ex: Q3/2020: $17,948 and PPP fund: $25,610). So I will continue to subtract the money from the next Quarter. Looking forward to hearing from you. Thanks so much. Good day!
When you submitted forgiveness for PPP, did you use 8 or 24 weeks covered period? You'll want to look at the covered period to determine which quarters to use wages for PPP. They don't have to be in 1 quarter unless you had an 8 week period that spanned only 1 quarter. For instance, if you received your PPP in late April, any qualified wages prior to the start date for PPP can go to ERTC as well March 13-31. If you used 40% non-payroll expenses for PPP, you only need 60% of the loan amount from payroll costs. And some non-wage items count towards payroll such as state employer taxes, 401K match, employer paid health care, and worker's compensation premiums. So, spread the wages needed for PPP over the covered period. Anything in excess of the amounts needed and outside of the covered period go to ERTC.
@@CandyMesser Dear Candy, So glad to receive your reply. I'm quite confused. I received PPP fund: $25,610 on July, 26.2020. And I use 24 weeks to fill forgiveness for PPP Loan. But in Quarter 3 my employees wages only had: $17,948. So I have to use a part of the next quarter's employee salary to deduct. Q4: $29,700. Looking forward to your detailed advice. I really appreciate your help. Thanks a lot. Good night!
@@JackTran99 If you were funded July 26, 2020, your covered period ends January 9, 2021. So you can use qualified wages for 3rd QTR up to July 25 for ERTC. You can also spread the wages needed for PPP in the 3rd and 4th QTRS. And again, depending on what you listed on the PPP forgiveness (if you filed a form that required a breakdown), up to 40% of the loan could be from non-payroll expenses such as rent and utilities. That means only $15,366 is needed from payroll. and as I commented earlier, payroll expenses include state payroll taxes, employer medical, 401K match, and worker's compensation premiums paid in the period. So your actual wages needed would be less than the $15,366. And since you can spread this out across 3 quarters (albeit 1st quarter 2021 would not have a lot of wages (if any) since the covered period ends Jan 9. But if you had any payroll paid between January 1-9, that is also in the covered period. The main thing is you reserve enough wages for PPP forgiveness to meet the required amount and then use the rest of the wages to claim ERTC. If you had employees working in the 3rd QTR that didn't work in the 4th, you'll want to claim their wages for ERTC since they won't be working in subsequent quarters. I hope this makes sense. It's a bit of a challenge to figure it all out, but with time and patience, you can do it.
@@JackTran99 Yes, you can claim 3rd QTR 2021 but not 4th QTR 2021 as the 4th is only for those that began after Feb 15, 2020 called recovery startup businesses.
1) If I am only claiming partial wages from the original 941 period then wouldn't the .062 be based off what I am claiming? My qualified wages will not be for an entire quarter. 2) Which line is the actual refunded amount for ERC? Lastly, once the 941X is submitted and a check is received back confirming the IRS has accepted the Form, do we then need to have our tax accountant redo our taxes for 2020 creating a possible risk for additional taxes due because our taxable income went up with the ERC credit and potential interest charges.
1. The calculation of the 6.2% is based on the original wages reported, not your qualified wages, so you must use the figure from section 5 on the original 941. 2. The refund will be the total ERTC. I am not listing lines as the forms have been revised multiple times. Assuming your calculations are correct, it's the qualified wages times the 50% or 70% credit (plus interest). This is broken down into refundable and non-refundable portions. 3. Yes, your CPA will have to amend your prior tax returns for the amount of the credit received. And yes, this will result in additional tax due. I assume the IRS won't charge interest due to the credit being filed later, but I don't know this for sure. But it's a different scenario than failing to pay taxes late on purpose. You didn't know when filing 2020 that you'd receive a credit that needed to be claimed.
@@CandyMesser Thank you. I am still a bit confused on #1 & #2. 1) Any requests for Qualified Amounts on the forms I am entering my 941 Wages less any wages used to forgive my PPP loan. I believe that is correct?. Except you are instructing for purposes of the Worksheet and the 6.2% calculation use the total 941 original wages vs. the Actual Qualified. Will they then deduct the total 6.2% from the original 941 from the 941X refund of 50% of my Qualified Wages? 2) How do they breakdown the 50% to refundable vs. non refundable.. isn't the whole 50% refundable?
@@positiveperksfromasassysma2663 I don't know why the IRS calls the 6.2% of the originally filed 941 wages as non-refundable other than the fact that it was your employer expense for wages paid in the quarter. When you get your refund, the notice will have one line as a tax deduction (the non-refundable amount) and a credit (the refundable amount). When you take the qualified wages multiplied by 50% (for 2020) or 70% (for 2021), you will get the full amount of the credit refunded.
@@CandyMesser I received an erc refund after I filed in July 2023. We redid my taxes for 2020 and I had to pay the irs money because the erc reduced my income for 2020 which I expected. I just received another bill from the irs stating I owe them for penalties from 2020 because the additional money I submitted after the erc payment indicated I did not pay my taxes on time. However, I did pay my taxes on time in 2020.. only because of the erc did it result in a balance due this July. The interest over the last 3 years is only on the balance that I paid this July. Have you encountered this and in your experience what should I do. I did not anticipate this interest charge because the only reason my tax change was because the irs kept changing the rules. This erc rule was not even in effect when I filed my taxes in 2020. Any advise appreciated.
@@positiveperksfromasassysma2663 we do not file income tax returns (1040, 1120, etc) so I haven't had anyone tell me they got penalty/interest notices. I do know the AICPA was pushing for the IRS to make sure employers did not pay penalties due to making adjustments apply to the years the ERTC was for rather than applying the credit in the year received. I would do 1 of 2 things: 1. Write a letter to the IRS stating the interest is due to a recalculation of tax because of receiving the ERTC credit. Request penalties/interest be removed because that is the only reason there is a balance. 2. Call the number on the notice and request the adjustment over the phone. More info can be found at www.irs.gov/payments/penalty-relief I think that notices are often automatically generated and mailed without any oversight and that you have a good reason for penalty/interest abatement.
THANK YOU THANK YOU THANK YOU!!! I have been researching how to properly fill out this paperwork for a week now! After piecing together all the info on who qualifies and HOW they can qualify, and finding all the necessary bits and pieces of what we need to fill it out (the IRS is usually more helpful for things like this), I STILL had questions on certain sections that I couldn't find answers to. And again, IRS has been very useful in the past with their instructions, but this time I find them lacking. Specifically needed the answers on WHERE do we include the PPP funds, and WHERE do we exclude the owner/family wages so they aren't included as part of the refundable ERC - it doesn't tell you on the worksheet nor the 941x (I thought there would be a line especially for PPP funds, to back out this number but there is not). I didn't want to guess how to fill it out and be wrong. So, after reading the comments, I am glad to know I was on the right track. Again, just didn't want to be wrong and then end up screwing our clients....THANK YOU SO MUCH FOR POSTING THIS - IT HAS BEEN A HECK OF A TIME TRYING TO FIND THE PROPER INFO. (So many companies out there capitalizing on on business owner's ERC refunds by charging percentages of their checks which is not okay. Glad we can file this on behalf of our clients for just our time.)
Hi Candy. I have 6 quarters to amend. I read somewhere that I should mail each 941-X separately. Should I send each via regular First Class, Certified, or Registered mail. What has been your process? Also, is it just PPP funds that shouldn't overlap with ERTC wages, or should EIDL loan funds used for payroll also not overlap with qualified wages? Also, I thought I'd share my colleague's experience with his 941-X filing, since a few people had questions in this thread. He filed his 2020 Q2 941-X in early April 2021 and received his check in late Oct 2021, about 7 months later. The check also included 21 days of interest on top of the credit amount. On the 941-X, he check-marked the boxes in Part 2 line 3 and 5.c. He also had included the worksheet in his filing, but I don't believe it's necessary. I guess it didn't hurt his filing.
We have sent them all together when we process for a client and haven't had an issue. Clients have been reporting back that they are getting their checks (albeit each quarter has its own check). I would just paperclip each quarter's 941-X together. We did not send certified or registered mail. And yes, our experience with clients reporting when they are getting checks is that it's taking about 8 months for the forms to be processed. In terms of which payroll dollars can't be used, I've only seen information that you can not use wages that you receive another tax credit for (work opportunity credit, qualified sick/family leave), but an EIDL is a loan you must pay back. I did not see anything saying wages paid with an EIDL loan must be excluded.
In the Worksheet Step 3 (3a) qualified wages - should this include the employer Social Security and medicare taxes as well. Example If the employee wages is $1000, do I enter $1000 or $1062?
@@dr.deepas4178 Not for ERTC. The employer tax paid on the original 941 is calculated to determine the non-refundable portion of the ERTC (not sure why it's called non-refundable as you do get the amount refunded, but it's considered a reduction of your tax liability, the rest of the ERTC is a refundable credit). The ERTC is a percentage of the wages paid to employees, not the employer tax paid.
This is a great video and Thanks for the help. I have Question about the first quarter of March 12th to march 31st 2020. The ERTC credits started so late in the first quarter of 2020 began march 12th. is the irs required all business to include the first quarter adjustments on with the second quarter adjustments, and file both on the second quarter 2020 941x . I prepared separately 941x 2020 march 12 to march 31. Please let me know Do i need to file both on the second quarter 2020 941X or i will send it separately. As I saw this you mentioned first quarters in the second quarter 2020. I have not mailed my erc 2020 yet and i am mailing end of this week.
I saw your question in Messenger first and responded, but replying here as well. You do not file separate returns for March and 2nd QTR. You add March 13-31 on the same form. You'll see on the worksheet it asks for wages for each period separately and then you add them together to determine ERTC. There is also one line on the 941x for the 2nd QTR wages and one line for March 13-31. There is no ERTC credit allowed for 1st quarter, so you claim March on the 2nd QTR filing.
Thank you so much for a very useful video. WIll I need to amend my 2020 and 2021 income tax returns to reduce wages for the amount of the credits we received for those years?
Claiming the ERTC due to a X% reduction in 2020 (or 2021 - whichever applies) compared to the same quarter in 2019, OR Claiming ERTC due to mandated government shutdown affecting more than a nominal portion of the business (whichever reason applies for your case). No wages claimed were used for PPP forgiveness.
Dear Teacher Candy, Good morning! Last night, I met a old friend. He started his own Nails Salons Business in Feb.2021. Can he apply for ERTC follow the Recovery Start Business program? Looking froward to hear your good news. Thank you & Take care.
This was an excellent video. I am confused about why the IRS makes us separate the ERTC into refundable and nonrefundable on the 941x when the guidance says its 100% refundable. Thanks for the info.
Your videos are excellent. Thank you ! Volunteer at a church. 2021 PPP loan forgiven - only payroll support submitted unfortunately. Minister salary and housing allowance allowed for PPP loan but not for ERC since ERC requires social security wages. Am filing Q1/Q2/Q3 2021Form 941-Xs to claim ERC. Can I offset the minister salary/housing allowance incurred during the 2021 24 week PPP coverage period (and included in the payroll support submitted for forgiveness) against the PPP loan amount and then use the remaining amount of PPP loan to offset qualified wages in 2021 ERC calculation? I could make note of this minister offset on the form 941-X. There is really no double counting of wages. Thank you again !
One last question that I had was how detailed do we have to be in line 37 (941-x)? Do we have to show how PPP loan was deducted to calculate the qualified wages and how much PPP amount is leftover to be used to deduct from the qualified ERTC for future quarters? Thank you 🙏 for all your help!!!!
We just put a description for why they qualify for the ERTC (saying the percentage of revenue reduction or the mandatory reduction/shutdown of services). If there was a PPP in the same period, we state no wages used for PPP forgiveness were included for ERTC.
Can you do a video that shows how to claim the credit on form 941 and not 941X? For businesses that have not filed payroll tax as of yet for 2020 or 2021?
That is a rare situation as most have already filed, but yes, I can do so. I am away from my computer for a few hours, and I have quite a bit on my plate today, but I will get it recorded as soon as I can.
@@CandyMesser This is my current situation as the owner of 3 small businesses that started between 2017 and 2020! I am still trying to figure out how to claim it for my business that started in 2020. Thank you so much for your quick reply.
@@booshiesupport Things have been a bit crazy today. I need to pull together information to demonstrate the filings and I haven't had the chance yet. If I can't get it done today, I will try to have it recorded by early next week.
@@CandyMesser That would be perfect for all of us out here! You're so informative and your information is immensely helpful. I'm sure the rest of your community would agree that you lay things out simply. Thank you
@@booshiesupport I have uploaded the video and it has to finish processing. But once done, the link to watch is th-cam.com/video/CqQv3A6x2FE/w-d-xo.html.
Really appreciate your detailed help. Everyone else teases you with some information and then tries to sell their service. We are a small church who lost a lot of members. One question. Several churches have hired a CPA to do this. The CPA said they qualify under the gov't closing mandate. I checked with our county Bd of Commissioners and there were no mandates in our county or state to close the churches. Our diocese made us close. (rightfully!) I don't think we qualify but the other churches are paying the CPAs to do it. What am I missing? Thanks
You must have been under a government-mandated shutdown. The IRS is planning on auditing for fraud, so even if it's paid out now, it may be required to be repaid if found they did not qualify. The guidelines state: Orders, proclamations, or decrees from the Federal government or any State or local government may be taken into account by an employer as “orders from an appropriate governmental authority” only if they limit “commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease 2019 (COVID-19)” and relate to the suspension of an employer’s operation of its trade or business. (Based on this preventing religious gatherings, you would qualify IF under an order that meets the requirements). Orders that are not from the Federal government must be from a State or local government that has jurisdiction over the employer’s operations. These orders are referred to as “governmental orders.” Whether orders, proclamations or decrees are governmental orders is determined without regard to the level of enforcement of the governmental order. Governmental orders include: • An order from the city’s mayor stating that all non-essential businesses must close for a specified period; • A State’s emergency proclamation that residents must shelter in place for a specified period, other than residents who are employed by an essential business and who may travel to and work at the workplace location; An order from a local official imposing a curfew on residents that impacts the operating hours of a trade or business for a specified period; • An order from a local health department mandating a workplace closure for cleaning and disinfecting. I don't think a Diocese falls under what is considered a government order, so if no other order was in place, you may not want to file. If you do, be prepared to prove your position.
I assume you are talking about 2020 up until 2nd QTR 2021. The worksheet was the same process until the 3rd QTR 2021. But I believe you are asking about how to determine qualified wages. There are different rules for 2020 and 2021, so it gets complicated. It may still be hard to explain it here. You may want to pay for a consultation for one-on-one direction. If so, please call my office at 310-534-5577. But I'll do my best to explain it here. For 2020, the max wage allowed is $10,000 with a 50% credit for ERTC. You also can't use the same wages for ERTC and PPP. So take the wages for your employees each quarter and look at your PPP funding date and calculate out 24 weeks (assuming that is the period you used for forgiveness). If you have enough wages in 2nd QTR 2020 plus March 13-31, 202 to get the full ERTC for your employees, don't use wages for PPP until 3rd QTR (assuming you'll have enough for PPP in the remaining weeks). If an employee didn't have the full $10,000 in 2nd QTR, and if wages remain after applying to PPP, you can submit the 941-X for subsequent quarters until the max is used. For 2021, the max is $10,000 per quarter and you calculate 70% of the wages for ERTC. If you had a PPP in 2021, you do the same as I described above and make sure you don't use the same wages for PPP and ERTC. I did have another video that explained how I did this for a client for their 2020 filings. You can watch it at th-cam.com/video/ExVnqFEnOa4/w-d-xo.html
Thank you so much for this video. I have an amount in 11b on my 941 - 2020. Do I need to enter that onto my 941-x and is it a negative or a positive amount? Thank you.
Hi Melissa, an amount on 11b means you claimed qualified sick and family leave for some wages paid. You do not list this on the 941-X, however, you must reduce qualified wages for the amount you used for this credit as you can't double-dip. However if you had a PPP loan that you also have to reserve wages for, you can put the wages used for qualified sick towards the PPP so as to not have to reduce ERTC wages.
@@CandyMesser I love you. The calculations are easy enough. I'm a comptroller and our PPP forgiven loan was received in 2021 The fun part is we are choosing the supply disruption and detailing it and documenting is going to be fun. Thank you so much!!!!!
Candy, thank you for the great video. One quick question. I noted that the line 36 checkbox was marked on 6:55 of the video. I was wondering if it was checked for a particular reason. My business did not have any reclassified workers for the period so I should leave it unmarked.
Thank you for this video, It is unbelievably helpful! I have two questions. first, I am filling out the form for 2nd Q 2020 and I see that 2C on the worksheet 2 asks about qualified wages from March 13-31. What are the criteria for qualifying wages in that time frame? Are you automatically able to claim all wages from that time period if youre doing a 941X for 2ndQ and you have not reached the $10,000 threshold per employee? second, you gave an answer to someone else below that I don't exactly follow. you said "If you qualify for 1st quarter 2021, you can also claim 2nd quarter 2021" Are you saying that you can claim a quarter that you wouldn't otherwise qualify for as long as you qualify for the previous quarter? I will qualify for 2nd Q 2021. Here's a copy of your answer I am referring to Candy Messer 5 months ago I'm glad my video was able to help you. There are 2 ways to qualify. One is to have a reduction of revenue (or in your case donations, etc). The other is to be under a government-mandated shutdown or reduction of services. Under the revenue reduction, a quarter in 2020 must have a 50% reduction compared to the same quarter in 2019. In 2021, the reduction in a quarter must be at least 20% compared to the same quarter in 2019. 2021 also allows a lookback of one quarter, so if the 1st quarter of 2021 didn't have a 20% reduction compared to the 1st quarter of 2019, but the 4th QTR of 2020 did compared to 4th QTR 2019, you can claim the 1st quarter 2021. If you qualify for 1st quarter 2021, you can also claim 2nd quarter 2021. If for the mandated shutdown, you can claim for the period you could not operate as usual. If shut down a full quarter, you can use the full quarter's qualified wages. If the mandate was lifted mid-quarter, you use the period up to the time you could resume regular activities. If you qualify for one reason for certain periods (such as shutdown) and the mandate is lifted but you can use the reduction of revenue in a quarter, that is fine. As long as one reason applies in a quarter, you can file.
Hi Doreen - to answer question #1: You qualify for March 13-31 if you can claim 2nd quarter due to the reduction of income or mandated shutdown. Rather than having a claim for the short period of 1st QTR 2020, they added that period on to claiming 2nd QTR 2020. So if your employees don't meet the $10,000 max, you can use their wages for that period to claim more for ERTC. For question 2: because you wouldn't know if you'd qualify to reduce payroll taxes in the quarter until the end of the quarter, the rules changed and you could use the prior quarter as a lookback period. So yes, if you qualify for 1st QTR 2021 but not 2nd 2021 with the income reduction or shutdown rule, you can use the alternative quarter to claim it.
Hi there, great tutorial. I was wondering about 3d, qualified health plan expenses, and how come no one seems utilize this refundable portion? Also, is it okay to back out the PPP loan over the course of the three quarters in 2021 however best maximizes the ERTC qualified wages? For example; I have 1 million in qualifed wages over the 24 week period, and $250,000 forgiven PPP loan, can I spread it out over the PPP loan period however will best serve the ERTC?
Hi Miki, I have quite a few clients who have employer medical expenses that are being added for ERTC. But some used it for PPP forgiveness, so they aren't using for ERTC. And yes, you can spread wages across the 24-week covered period for PPP forgiveness to give you the best benefit for ERTC.
Our original 941's and 943's filed include a family member's wages. On the 941X and 943X, where do you subtract those wages and tax payments, because they do not qualify for ERC?
Would you not include the employer share of social security tax on the worksheet, line 1H?....thanks. Jon....if one was checking box c on the 1st page of the 941-x.
Thanks for the detailed video! I have a question about my particular situation: I purchased a business (asset sale so we took over all history of the business) that closed December 2020 and would like to apply for this ERTC. The previous owner and her son were on the payroll until December 2020. Since they are technically not owners any longer, is it correct that I can include their wages in the calculation?
I'm not sure I know enough to answer the question. But when you made the purchase if you then began payroll with your own EIN (or already had one) and added them as employees, it is obvious in this case that they are not owners of the business with that EIN. I am assuming that is what you did, but I want to make sure. If you took over their EIN (I'm thinking not if you say asset purchase), it could be a bit more complicated if a change of ownership was not reported to the IRS. If the former is the case, yes, you may claim their wages for ERTC.
@@CandyMesser Sorry, I screwed that up. We purchased the business as a STOCK sale, NOT an asset sale. It has been the same EIN for the history of the business. Sorry for the confusion.
@@NickMace-l5z It sounds like you would not qualify since your company has been in existence since prior to Feb 15, 2020, and only acquired additional resources that were added to the company already operating.
@@CandyMesser I am totally confused by your response. Could you tell me why the company wouldn't qualify? Let me start my question over if that helps with my mistake corrected and hopefully with more clarity of the situation: I have a question about my particular situation: I purchased a business (STOCK sale so we took over all history of the business) and the sale occurred in December 2020. The business is still in operation and we do qualify for ERTC per my calculations of the decreased revenue over 2020 and 2021. The previous owner and her son were on the payroll until December 2020. Since they are technically not owners any longer, is it correct that I can include their wages in the ERTC calculation?
@@NickMace-l5z I thought you were asking if you qualified as a recovery startup business, and based on the facts you had presented regarding the company having been in existence, my answer was no since your business did not begin after Feb 15, 2020. You didn't mention income reduction as the reason. If the company had at least a 50% reduction of income in 2nd, 3rd, and/or 4th QTRs of 2020 compared to 2019, you can qualify for that year. If a 20% reduction in 2021 over the same quarter(s) in 2019, you can qualify. But if the sale occurred in Dec 2020, I assume the prior owner and son would not qualify for 2020 if she was a majority owner (owns more than 50%). If she did not own more than 50%, their wages would count toward ERTC. I hope this better answers your question.
u should do another video about doing an amended of a previous 941X. for example to take retention credit on tipped wages or officer wages if each is 50/50 s-corp owners and unrelated
@@Boris_Greca Video was recorded. Hopefully, we can get it uploaded today or tomorrow. My admin who ads the intro/close had surgery yesterday. Depending on how she feels, she will upload for me soon.
This is the best informational video out there. I'm not sure where or how to apply the PPP credit the clients received. Also, on some companies that pay the health insurance premiums in full for the employees where and how are these calculated? I want to help my clients, I just don't want to file this ERC incorrectly. Thanks for any help.
In terms of PPP, you must reduce qualified wages by the amount put to PPP. However, most claimed PPP over 24 weeks, so you can spread the wages for PPP over multiple quarters to help them get the ERTC credit in multiple quarters (this is most important for 2021 since they can now claim wages up to $10,000 per quarter rather than for the year in 2020). Also, whatever the expense for medical paid by the employer can be used for ERTC (if not used for PPP).
Oh my, one more, lol... The March 13-31 wages, is that total included the total Qualified wages for the retention credit on the 941x 2nd Qtr line 30? Or do I just separate those wages on line 33a? And do include those March wages as part of the calculation for the nonrefundable portion of employee rentention credit? How do I get the March wages X .50 into the refundable credit? Almost at the finish line. Lol.
I'm so sorry for the late reply. Your comment only now popped up for me to review and it's been more than a month since you left it. I'm not sure how that happened.March 13-31 is not included on line 30 of the 941-X. They are listed on line 33a. You do not include them for the calculation to determine the non-refundable credit. Only the wages on line 5a of the 941 (through 2nd QTR 2021) or 5c for filings after 2nd QTR 2021. You'll add March qualified wages to 2nd quarter and multiply this by .5 to get total ERTC.
I did like this video very much. I am working with the worksheets that were revised on 7-2021. They are a little different but still able to find where the figures go. In the video there was nothing mentioned about where to apply the PPP wages. Is there a spot to put that?
You don't apply PPP wages on the 941. You reduce the qualified wages by what was used for PPP. For example, if you had $75,000 in wages, but $20,000 was used for PPP, and no remaining wages were greater than the $10,000 per employee allowed, you would have $55,000 in qualified wages. But the worksheet you are using is for 3rd QTR 2021, but not earlier. Most clients who got the PPP in 2021 don't have a qualified period into 3rd QTR. Make sure you are using the correct worksheet. And I do have a video with the updated info: th-cam.com/video/Qm2WCp3szB0/w-d-xo.html
Thank you for your video. After much hair pulling I almost understand. What I am not quite understanding is 3a on the worksheet/Line 30 on the 941-X the number comes from my SS Wages for that quarter. But on Line 3c from worksheet to line 33a on 941 - X I am unclear as to where that number comes from? Is that the amount of monies used from the PPP loan for that quarter?
Line 3a on the worksheet may not be your Social Security Wages reported for the quarter. You must remove any owners/family wages and anything over the maximum allowed per employee. For instance, if filing in 2020, you could only claim the credit on the maximum of $10,000 wages per employee for 2020 combined. Most businesses paid more than that to many employees for the qualifying periods. So one quarter may have a much higher qualified wage figure compared to a later one which is claiming the remaining wages available. Also, if you had PPP forgiveness, you can't use the same wages for ERTC and PPP, so you must reduce the wage amount in 3a (and what will go on line 30). Many of the filings we have done for businesses have different numbers in 3a than what appeared on the originally filed 941-X
I am unclear on ownership eligibility for ERC. My business is an S Corp with 2 owners 50% each. The owners are brothers. Since neither of us is more than 50% owner, do our wages qualify?
Here is the link to a video I created giving an example. th-cam.com/video/ExVnqFEnOa4/w-d-xo.html I suggest you first see if you have 40% non-payroll approved expenses. Then see what non-wage payroll expenses you can use for PPP (state payroll taxes, employer paid health care and/or 401K match, and worker's compensation premiums). Once you have these amounts, subtract from your loan amount to see the amount of wages needed for forgiveness. Start with wages that can't be used for ERTC (amounts over $10,000 per employee per quarter or year depending on if it's in 2020 or 2021), and wages for owners of more than 50% of the company and related individuals). If this isn't enough over the covered period, you'll need to take wages from one or two quarters over the period to get full forgiveness. You'll want to figure out how much to use to maximize ERTC in the quarters while getting full forgiveness.
Hello Candy, On line 36 you checked the classify worker. Is this okay to the IRS? Should we have checked line 35 because we are essentially correcting an "over-reported amount"?
@@sunnybanails3794 No problem. If I hadn't mentioned it in the video in the first place in error, you wouldn't have had to ask. But it was a lot of effort to record the video, so I didn't want to re-record just to take that part out. Thanks for your understanding!
Thanks. But why box D is checked on line 5? The claim does not affect taxes withheld from employees .Box C should be checked because it's a refund for the employer's share of taxes!
The 941-X is not being filed due to a mistake in the reporting of the tax. This is a credit the government is offering based on wages filed in previous quarters. There is no correction to the employer's share of taxes. Box C also says the correction can't be traced to employees or they didn't sign a consent to claim the tax. But again, the tax is not due to an error in reporting, it is a method allowed to get the ERTC for wages paid. so we are using D to complete the returns.
@@CandyMesser If you check step 3 on the worksheet to calculate the credit , The nonrefundable portion of the credit reduces the employer's share of social security taxes to zero and the remainder is the refundable portion, So the credit mainly affects the employer's share of taxes. That's why box C should be checked .
@ahmed abdallah I think the difference is that I didn't show an example of someone having the non-refundable sick and family leave (I even mentioned that in the video), so the amount of the Social Security on line 1l carries through at the bottom on lines 3i and 3j and remains non-refundable. So far, I have not had anyone that paid out the sick and had to include that amount in the calculation, so line 3j is still listed as non-refundable on the 941-X. So, if you feel box C is better, please use it, but I have used D. To be honest, some of these situations aren't always completely clear. In the long run, the IRS wants to make sure that anything refunded is not due back to the employee (or they certify they have repaid anything withheld in error). But the ERTC doesn't have a bearing on withheld amounts from employees. I appreciate your response to my video. I don't want to cause any confusion.
Yes, the non-refundable portion is also given to you. I don't know why the IRS set up the filing this way and called it refundable and non-refundable other than the fact that non-refundable is based on the employer tax you paid, so when you get your paperwork explaining the refund, it will say this portion is a reduction of the tax due. The refundable portion will be listed as a credit. But you will get back both portions to equal the total ERTC you calculated (assuming there are no errors).
Hi Candy, your video is FANTASTIC! Question, line 30 on the 941x is that total wages reported on 941 or are the ineligible wages backed out. For a small business that paid the owner/officer - his wages are included on the quarterly 941, but because he is an officer, it is my understanding his wages are not eligible for ERC, so when completing the 941x for all other eligible wages, does it include what was reported on the 941 with the officer wages included, or only the amount of what total wages are eligible wages. Example - 941 filed $50,000. Officer wages $10,000 not eligible for ERC. 941x line 30 enter $50,000 or $40,000? Thank you!
It's not if someone is an officer that wages are ineligible. It's if they are a majority owner (greater than 50%). So if he is a majority owner, line 30 is the total qualified wages, not total payroll.
Hi Candy. I sold my restaurant in 2022. If I claim ERTC via 941-X for 2020 & 2021 (the I time owned the business), how can I ensure that the refunds get sent directly to me? My understanding is that the refund checks are sent to the business address on the 941. Can I put my personal address on the 941-X? Will the IRS then consider that the new business address? I wouldn't want to mess up any future 941 filings for the new business owner. I appreciate any insights.
Is the new owner setting up their own corporation (EIN)? If so, you can submit a change of address form with the IRS (8822-B) with your business name and EIN and have it go to your home address. Otherwise, it would be up to the new owner to forward the funds to you if received at the restaurant. By changing the address on the business name and EIN, it shouldn't affect the new owner if they have their own company name and EIN. The IRS doesn't look at the address to begin with, they look at the entity name. I hope this helps!
You don't remove it on the worksheet. You remove as you are calculating your qualified wages. Once you have the total qualified wages you can use, that is the number transferred to the worksheet for part 3 line 3a. It is not accounted for in any other area.
Hello, with the help of your video and comments, I was able to submit my 941x's to claim the ERC for a couple quarters of 2020. I now read that the erc would offset wages prompting a amended tax filing for my business and in my case, revised k1 for sub s and finally amended personal tax filing for 2020. My question is that of timing. Since the amended 941's have not been approved, and I have yet to learn if the funds will be forthcoming, it would be premature to make all the related amendments to wages yet some of the writings suggest the amended tax returns should be done coincident with the amended 941 claiming the ERC. Are you aware of any guidance related to the timing of the amendments of corp tax and k1 which would be related to the amended 941's?
Yes, your original return would be amended based on the credits you are granted, however, I think it prudent to wait until those funds have been received to make sure they are the amount you calculated. Once you have the payments (or credits if requesting an adjustment to future tax liabilities), you will know the total amount the IRS is issuing in credits and amend the return/K-1s at that time. But ask your tax preparer their opinion as well.
You first must find the non-refundable portion, For 2020 and 1st 2 quarters of 2021, you take total Social Security wages (and tips if applicable) on line 5 of your 941 and multiply by 6.2%. For claims beginning with July 2021 wages, you take Medicare wages and multiply by 1.45%. You take your qualified wages and multiply by 50% (2020) or 70% (2021) to get total ERTC. Subtract non-refundable from total ERTC to get the refundable portion. If you want help, you can reach out to my office for a consultation ($250) and they will walk you through the process, or if you'd like us to do the claims for you, there is a fee per quarter. You can contact my office at 310-534-5577 or contact@abandp.com.
Good morning, my dear Teacher Candy, I met my girl friend at the party last night. She filed S-Corp taxes and have paid salary to her employees, can she claim ERTC? Looking forward to receive your advice. Thank you.
I don't have the information needed to know if she qualifies. But, if she was under a government-mandated full or partial shutdown, had a reduction of income of at least 50% in 2nd, 3rd, or 4th QTRS of 2020 compared to the same quarters in 2019, had at least a 20% reduction of income in 4th QTR 2020, 1st, 2nd, and/or 3rd in 2021, or began her business after February 15, 2020, she could qualify.
@@CandyMesser Dear My teacher Candy, thanks for your prompt reply. I strongly appreciate your help. My friend's business has all the criteria such as 50% reduction compared to 2019 for Tax 2020, and 20% reduction compared to 2019 for Tax 2021. I just confused, can she claim ERTC with business fill Form 1120-s tax return? Have a nice day and take care my dear Teacher.
I am not sure where you are getting the information you can't use box 2 to file for a refund. The only thing it says you can't do is to use the claim process if you underreported any amounts. Specifically, it uses the word refund in the directions which say "Check this box if you overreported amounts only and you would like to use the claim process to ask for a refund or abatement of the amount shown on line 27. Don’t check this box if you’re correcting ANY underreported amounts on this form." So you may check box 2 to claim a refund of the ERTC.
Hi Candy again, when I thought I can finish up and enter the amounts from the worksheets into the 941 X for each qualified quarter, I ran into another problem. I can not find any amount in 941 line 21 and 24 (for 2nd Q 2020). I informed our payroll provider and was told that they do not know the qualified wages for the ERTC.
You will have to determine the qualified wages for each quarter. I don't know what periods you are are doing, but it's a max of $10,000 total for 2020 per employee but $10,000 per quarter per employee in 2021. You can't use the same wages for PPP and ERTC. If you need help, contact our office for a quote based on the number of employees paid in qualified quarters each year. 310-534-5577 or contact@abandp.com.
My church had a 30% drop in revenue in Q2 2021 compared to Q2 2019, but all other quarters didn’t meet the revenue qualification. My understanding is we can claim the credit for both Q2 and Q3 2021 based on the Q2 decrease? If so, what reason do you put on 941x for Q3? Q2 I would say I am claiming for a 30% income reduction, but in Q3 do you say you are claiming it due to Q2 income reduction?
Yes, you can say for Q2 that you are claiming it due to a greater than 20% reduction for that quarter compared to the same quarter in 2019. For the 3rd QTR, you can say claiming the credit based on a reduction greater than 20% using the alternative quarter qualification (2nd QTR 2021). Many churches were also under government-required shutdowns (or partial shutdowns). If you were unable to meet due to mandated orders, you can qualify for those quarters as well for the period you were not allowed to have in-person meetings, etc.
Your video was super informative and easy to understand .. I'm in the process of gathering all the needed forms to process the 941-x's. I'm struggling finding the correct 941 worksheet that you share in the video. Any tips on locating them would be greatly appreciated. Thanks in advance.
You can e-mail my staff at contact@abandp.com and they will e-mail it to you. I know it's not easy to find, so I have asked my staff to send to anyone requesting it.
It depends on where your business is located which address is used, so you'll have to determine it from your location (see below). Also, you only mail the 941-X forms, now supporting info. If filing more than one quarter, clip each quarter together but you can send them all in the same envelope. Find where you are located and use the below address: Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin: Department of the Treasury Internal Revenue Service Cincinnati, OH 45999-0005 Alabama, Alaska, Arizona, Arkansas, California, Colorado, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wyoming: Department of the Treasury Internal Revenue Service Ogden, UT 84201-0005 Special filing address for exempt organizations; federal, state, and local governmental entities; and Indian tribal governmental entities, regardless of location: Department of the Treasury Internal Revenue Service Ogden, UT 84201-0005
Thanks for this helpful video. I just realized that I did not check box 5d when I sent in my qtr. 1 and qtr. 2 941x. I only checked box 3. Will my refund be rejected? Should I send another copy of the 941x with the box checked? I'm wondering if this is the reason I have not received a refund.
The IRS is VERY behind in processing the refunds, so I don't think not checking the box is why you haven't had a response. If you were denied and it had been reviewed, you would have received something in writing. Technically, you are supposed to check a box in section 5 if you marked "claim." But since the ERTC has nothing to do with the employer and/or employee taxes withheld, maybe they would process it without a box checked (but I don't know if this is the case). BUT, if you send in another form, you wouldn't want to list any of the number adjustments since you've already filed. You would only mark a box in section 5 and put a note in the description section that you failed to include a selection. If the IRS completely rejects your 941-X though, submitting one with only the box in section 5 checked won't help as they would not have the numbers to process it. But if you put numbers on a 2nd return, it may be processed twice forcing you to file another amendment and return the 2nd credit. I almost think it's better to wait to see if you get the refund even if a box wasn't checked. But again, I'm only guessing what should be done in this case. There is no info on how to handle this situation. I'd suggest calling the IRS to ask, but most of the time, you can't even get through and put on hold. And if you miraculously do get on hold, you'll wait a very long time, and the agent may not have an answer. The IRS is taking up to 8 months to process forms (something a client submitted in March just had a letter of acknowledgment (not ERTC related) just last week. So, if it hasn't been that long since you submitted your request, you may want to wait to see what happens.
Hi Candy!! thank you for your videos they are really informative and useful!! I have a question.. I'm filing the 941X to getting the ERC but the total wages are not the same s as the qualified wages which will be the amount on 18a 941X? ( Non refundable portion) Because in my logic would be the one for the qualified wages but if I follow the instructions for the calculation in worksheet 1 should be for the total wages thank you so much!!
The non-refundable calculation is not based on qualified wages. It's based on the wages originally reported on the 941 and finding the employer share of the Social Security taxes. The original wages and qualified wages can be very different (removing majority owners and/or relatives, wages used for PPP or for other credits). If you follow the instructions on the worksheet you should end up with the correct information reported.
Thank you so much for taking the time to make this video! It is so helpful. Would you please be able to provide the 941-x form for 2021? I'm not sure if it matters which revised version you use but wanted to be sure I used the correct version if it matters? Thank you again for providing this information.
The most recent form was released in July 2021. If that is not the form you have and you'd like us to send you one, please e-mail contact@abandp.com and request it. There is no way for me to attach it here.
All my stuff is approved but there asking me for my original 941 form..my accountant that filed it is no longer with me..I only have the adjust 941 form..any thoughts on how would I get my original form ?
That's odd. If it was filed, they wouldn't be asking for it, so it seems it wasn't filed (assuming it was supposed to be electronic). If mailed, maybe it was lost. And it sounds like your CPA didn't send you a copy if you are asking about what to do. I think you first need to try to reach your prior CPA and tell them the IRS is requesting it and you need the copy. Hopefully, you can reach them and they will send it to you. If you can't get a copy, you'll have to recreate it from your payroll data.
Hi, Good afternoon. My dear Teacher Candy, I had a friend, she had a Nail Salons business. In 2019 she paid salary to employees by 1099. But in 2020 she paid by W2. So can I help her claim for ERTC program? The revenue 2020 is greatly reduced (-67%) because of Covid 19. Looking forward to receive your good news. Thanks a lot.
What if the company did withhold the employee social security & Medicare tax? If you do the 941-X to claim the ERC which option you click ? And do you have to return the tax to employees when the company receive back the refund check. I am amending the 2021 941 forms in 2022 and looking to receive a refund.
I am so sorry for the late reply. This did not show in my notifications until now. You did withhold the Social Security and Medicare tax from employees, but the credit is not based on employee taxes, and you do not refund them. The credit is based on the employer share of the Social Security tax for 2020 and the first 2 quarters of 2021, and Medicare tax for 3rd and 4th QTRS (for those who qualify for 4th). So you should select select 5D on the 941-X. The credit is calculated on qualified wages. The non-refundable portion is the amount of employer paid Social Security or Medicare tax on the original 941. The refundable portion is the total ERTC less the non-refundable portion.
Candy, you mention below several times that we have to list out the non-refundable credit that was the amount of the employer's share of SS tax but that we can also get that amount back as a credit. If we are only completing lines 18a for nonrefundable portion (let's say it is $5,000) and line 26a for refundable portion (let's say it is $35,000) would I then put $40,000 (negative) in line 27 or would I put $30,000 (negative) as my total? I know we also fill out line 30 for qualified wages too.
Hi Wade, you add the amounts on lines 18a and 26a to put the total ERTC on line 27 (you'll see this on the worksheet you use to prepare the figures to put onto the 941-X). Both amounts are negative in column 4 (if your number is positive in column 3 you put it as negative in 4) so you would put -$40,000 on line 27.
18a is the Nonrefundable portion of SS wages (shown as a negative number). If its "nonrefundable portion" then why can it be added to line 27 (as credit due)? Thank you again for all your help! This has helped a lot!
Hi Candy. For 2020, does a business only count FTE? What about part time? I’ve been reading that the rules were amended to include part time employees. Thank you so much.
I think there is a little confusion. For 2020, if you had 100 or more full-time employees, you could only use qualified wages for anyone you paid but they weren't working. But this was for any employee who was paid even though they were unable to work. So if you had part-time employees compensated for the closure of the business and they couldn't work, they would also qualify for ERTC. In 2021, the figure changed to 500 full-time employees. So if you meet the number of employees (100 full-time for 2020 and 500 full-time for 2021), only use wages (up to the max 10,000 per YEAR for 2020 (March 13-Dec 31) or 10,000 per quarter for 2021) for employees who were compensated even if they couldn't work. If you don't have this number of workers, you can use wages for all employees up to the max based on how you qualify (reduction of income - can claim full quarter, OR mandatory reduction of services - claim for the impact period).
What if the 941 was never filed for the quarter I'm seeking the employee retention credit? Can I still get the credit if a 941 was not filed in Q1 2020 or Q4 2020? No 941 was filed for all of 2021 either.
The ERTC does not count for 1st QTR 2020 (only March 13-31 wages can be used, and that amount is claimed on the 2nd QTR 2020 form). You can claim the credit on the original 941 if not filed (but the 2020 form didn't have the ERTC listed at first. If you can't claim it on your original 941 because the lines don't appear on the form, then fill out the 941 as usual and submit the 941-X with it). For 2021, an update was made to the form, so you can claim the ERTC on the original 941. I have a video demonstrating this as well. studio.th-cam.com/users/videoCqQv3A6x2FE/edit
If you have a quarter that has had PPP funds, you use what gross wages that were not paid with PPP. When I fill out the worksheet, step 1 ask to put the full amount to figure out SS tax but later I have qualified wages that were less. So do you multiply the qualified wages x 6.2 to get the correct amount so that you are getting credit on SS that is correct?
You are not getting credit on Social Security. This calculation is only determining what your employer cost of the Social Security tax was on the originally filed return which becomes the non-refundable portion of the credit (the full ERTC calculated on qualified wages only is made up of the non-refundable and refundable portions).
If a qualifying S-corp did not pay owner wages in 1Q or 2Q 2021 (payments made were originally classified as distributions) and you decide to now take the position S-corp owners qualify for the credit (the IRS knows the issue and has had over 6 mos to clarify and they have not), would you amend the Form 941's to claim $10k in owner wages and $7k in ERTC?
I assume in this example no owner owns 51% or more (if anyone does, they do not qualify). But if 50% or less is owned by a person, you can go back and say the owners were paid. However, you will incur penalties for not paying the taxes timely. But this will be less than the ERTC credit you could claim, so it would probably be worth it. You would then have to add additional information I didn't include in my video including increasing wages, Social Security, and Medicare (and maybe federal income tax if you choose to withhold - but you might not want to in order to reduce the penalty) on lines 6, 8, 12 and 15.
@@CandyMesser penalties for not paying timely if wages were earned the last day of the quarter and the ERTC results in a large tax overpayment? I disagree that 51% or more S-Corp owners and their spouses do not qualify.
@Randall If you earned the wages the last day of the quarter, you won't have the penalty for the 2nd quarter if applying the ERTC on the 2nd quarter 941, but you could for the first (hopefully not). If you were taking the credit for the ERTC in the same quarter, it should have been listed on the filed 941. So although the credit is greater than the tax due, the IRS could say you didn't pay on time since you are requesting the credit after the fact. And the reason I say anyone owning 51% or more does not qualify is that according to the document "Guidance on the Employee Retention Credit under section 2301 of the Coronavirus Aid, Relief and Economic Security Act Notice 2021-20, it states, "Section 2301(e) of the CARES Act also provides that rules similar to the rules of section 51(i)(1) of the Code (relating to the work opportunity credit) apply for purposes of the employee retention credit. Section 51(i)(1) provides that wages paid to “related individuals” (within the meaning of section 51(i)(1)) may not be taken into account for determining the credit under section 51(a) of the Code. Accordingly, wages paid to related individuals may not be taken into account for determining qualified wages for the employee retention credit. Similarly, section 2301(h)(1) of the CARES Act provides that an employee will not be included for purposes of computing the employee retention credit for any period that an employer is allowed a work opportunity credit under section 51 with respect to that employee for that period". Under IRC Section 51(i)(1) it states "For an eligible employer that is a corporation, a "related individual" is any person that has any of the above relationships (listed previously in the document) to an individual who directly or indirectly owns more than 50% in value of the corporation's outstanding stock. For an entity other than a corporation, the test is based on such a relationship with an individual who is an owner of more than 50% of the capital and profits interest in the entity. For an estate or trust, the test is based on such a relationship with an individual who is a grantor, beneficiary, or fiduciary of the estate or trust. But a spouse is not listed on the "related individuals" description, so if you own 51% or more, your wife would qualify. If you are 50/50, you should both qualify. The related individuals include: Child or descendant of a child Brother, sister, stepbrother, or stepsister Father or mother or an ancestor of either Stepfather or stepmother Niece of Nephew Aunt or uncle Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. I hope you find this information helpful.
Your example assumes all wages for th quarter are qualified wages for ERC. What if this includes wages paid in excess of $10k for an employee during the quarter?
I thought I had said qualified wages in the video, but I don't recall. I create a spreadsheet to track the wages by employee as many of my clients qualify for multiple quarters. If someone was paid more than $10,000 in the quarter, I create a column to calculate the qualified wages and create an "if function" that says if the wages are greater than $10,000 enter $10,000, otherwise enter the total wages paid to each employee. Then the total of that column is the amount of the qualified wages to use. If we are doing more than one quarter, I also track the wages to see the amount I can use for each employee for subsequent periods. Of course, if there is PPP loan, we must also remove the amount of wages being used for forgiveness in the covered period.
Aren't we required to file (if we normally have to file schedule B) an amended Schedule B as well? And if so, it's my understanding that we are to deduct the amount of the credits from each deposit shown on schedule B until we use it all for that quarter, but for the 2nd Qtr. of 2020, since March12, 2020 - March 31, 2020 is supposed to be added to the 2nd QTR 941 X, do we also deduct those credits from the 2nd Qtr. amended schedule B?
No, you do not amend or file schedule B with the ERTC. Your liabilities and when they occurred did not change (this shows the tax due each time payroll is run and the tax amounts withheld are still the same.) You apply the credits on line 13a of the 941 form (Total deposits for the quarter including overpayment from a prior quarter and overpayments applied from forms 941-X filed in the current quarter). So you will only send in the 941-X and then apply the credits to the current quarter's 941 in which you file the 941-X and any subsequent quarters if the credit is not used on the 1st 941 submitted. To keep it easier to track, you could also continue to pay your taxes each period and receive a refund check in the future. That way you don't have to keep track of how much is used (and in case the IRS determines a different amount for your refund).
@@CandyMesser Thank you. I went back and re-read the directions late yesterday and had pretty much decided that an amended Schedule B was not needed. I appreciate you taking the time to answer my question.
The IRS did not allow a 941-X for the first quarter 2020, but they allow you to add wages for March 13-31 on the 2nd quarter 2020 return. You will add qualified wages for this period to line 33a on the 941-X and add this amount to your 2nd quarter qualified wages to determine your ERTC.
Yes, 2020 only allows qualified wages up to $10,000 per year, so you must look at each employee's earnings over multiple quarters and stop using them once they've hit the $10,000 total (of course, subtracting wages used towards PPP, if applicable). But for 2021, it is 10,000 per quarter.
No, you don't list tax deposits. But the non-refundable portion of your calculation determines your Social Security expense as the employer for the quarter (or if filing 3rd or 4th QTR (if a recovery startup business) 2021, you are figuring the Medicare portion.
Yes, we can assist. If you provide the qualified wages for each period, it's $500 per quarter for us to calculate the figures and complete the 941-X. If you need help determining the qualified wages and want to send us all the info for payroll and PPP (if applicable), we charge $500 for every 5 employees per year (if we're doing both 2020 and 2021). You can reach out to my staff to start the process by calling 310-534-5577 or emailing contact@abandp.com.
Hi, sorry quick question, if we are using line 33a to add in 1stQ qualified wages, where do we calculate the additional employer share taxes? It seems only q2 taxes are represented? Does that make sense what I'm asking?
You aren't calculating employer share of taxes. The only area you put the employer's social security is in section 1 of the worksheet to help determine your credit. You will put March 13-31, 2020 wages on line 33 (and the 2nd quarter 2020 wages on line 30). You will determine your ERTC (refundable and non-refundable) and enter that on the 941-X. Do you have the worksheet to help you determine the figures? If not, reach out to my office at contact@abandp.com and they will send it to you.
@@westons3446 For 2020, you can only claim wages for March 13 through March 31 and you will include it on the 2nd quarter 941-X on line 33a. If you qualify for 2021, you will calculate all wages and report on line 30. To calculate the exact credit, use the worksheet. If you need the worksheet, my staff can send to you. Call 310-534-5577 or email contact@abandp.com. We'll be happy to forward it to you.
@@westons3446 You can only count March 13-March 31 2020 wages when calculating the credit, and it is included with the 2nd quarter wages (different line) on the 2nd quarter 2020 941-X.
In the example, the client I used had all wages qualified. No owners are on payroll and everyone earned less than the $10,000 max. This client didn't take out a PPP loan, and even if so, the covered period was 24 weeks and they would have had enough wages in the subsequent quarter to qualify for forgiveness.
I have a client who is recovery startup as they started in July 2020. However, I heard that those business would still qualify for Q1 and Q2 year 2021 if they had a decline in gross receipts. Can you confirm if this is correct, and if so what is the percentage decline between the quarters? Also, which worksheet would I used to calculate those credits.
A recovery startup business can qualify for earlier quarters if it had a mandatory shutdown or reduction of services. But the comparison for revenue was usually comparing one quarter in 2021 to the same in 2019. Since recovery startup businesses weren't operating in 2019, the IRS did allow recovery businesses to compare the quarter in question in 2021 to the same in 2020. Since they didn't begin operating until the 3rd QTR of 2020, they don't have earlier quarters to compare to for 2021. I don't believe they can qualify except as a recovery startup business since they don't have the history to compare.
Hello, thanks again for the info. I am including Q1 2020 March 13-31st qualified wages in the Q2 2020 941x but there is no mention of the corresponding nonrefundable portion of those wages, are they being disregarded or am i missing an entry somewhere??
You don't have to calculate the non-refundable on the March 2020 wages. You are only using the original 2nd QTR wages and figuring the 6.2% of the SS wages to determine the employer's share of the tax. This gives the non-refundable portion of the calculation.
Yes, but you must use the correct worksheet. As of July 2021, the non-refundable portion of the credit is calculated from Medicare Wages and multiplied by 1.45% instead of Social Security Wages by 6/2%. But as long as you use the correct worksheet, you can use the revised 941-X to complete any period.
![ERC 2021: Employee Retention Tax Credit Explained [Understand What is ERTC] How to Get ERTC Credit!](http://i.ytimg.com/vi/h2ZwRN1GQVI/mqdefault.jpg)
Thank Candy! We had an ERC firm calculate the qualified wages and healthcare for our large business, but not provide us guidance on how to file the 941x. Your video was a life saver!!
I'm so happy it helped you!
Candy, I work for a firm that assists people with ERTC. I love that you continue to answer each question a year later.
Thank you for saying so. I appreciate your comment.
Hi would you be willing to help me complete this application?
@@natalieshaba7032I have to yield to Candy.
@@natalieshaba7032 We have a few different paid options (as you can probably imagine, we have had lots of people reach out for help. I gave the overview as an example to help people so they didn't need to pay for assistance, but if we have to do specific numbers for someone, we do charge). We can do a consult for $250.00 where we walk you through the process to help you know where on the 941-X to put the information so you can file. If you want us to do the filings, we charge $500 per quarter if you have already determined qualified wages by employee. We charge extra to take the payroll info and determine qualified wages for each employee (taking into consideration anything used for PPP forgiveness, if applicable). If you are interested in any of these options, please contact my staff at 310-534-5577 or contact@abandp.com and they will help you through the next steps.
Candy, I just wanted to say thank you so much for your video and all of your help in the comments. With the guidance of your videos, I filed in April 2023 and got our first check this week! The process moved so quickly! We still are waiting for two more that we got letters for.
I'm so happy to hear this! Thank you for letting me know the info helped you.
but remember it doesnt stop there.. you now likely must amend your income tax returns 2020/and/dor 2021 for the year of each ERTC.. ERTC counts as income in year of the retention credit.
@@Boris_Greca Yes, returns must be amended for the year the credit(s) were received.
Thank you! Just want to add the comments regarding not having enough info are not valid points, this video is just how to fill out the 941X which is the only part some of us need. We already know how to calculate the qualifying wages. Also appreciate you commenting on the questions as I had the same questions and now know the answers. Your amazing.
Thank you for your comments. I really appreciate your taking the time to give your feedback!
Great Video! Best info on TH-cam regarding ERTC and reporting to IRS.
Thank you so much for your feedback! I'm glad you found it helpful.
Great video that walks us through the process, step by step. Worked very well for me, just applying for the earlier quarters in 2021 and this still works great. Thanks again.
You are welcome!
Thank you, this is a blessing to my small business. Great instructions really helped.
I'm so glad I was able to help you! If you know of any other business owners who need to claim the credit, please let them know about my videos. There are too many aggressive companies out there looking to take a large chunk of the credit, and I don't want that to happen.
This video helped tremendously! Thank you for making it. The 941X instructions can be confusing and you made this very clear.
I'm glad it helped you. I agree it can be confusing.
@@CandyMesser @Candy Messer I didnot see that you calculated the nonrefundable portion for employer ss tax on wages earned march 13 - march 31 2020, do we not calculate that and include it on form 941X?
@@shurouqabuaita6957 The instructions don't ask you to do so. It asks for the wages reported on the original 941. It's to determine your employer's expense for Social Security wages originally reported on the 941. It is not calculated based on qualified wages. Keep in mind qualified wages for ERTC could be much less than the wages on the 941 as well, but you still must use the wages from the 941. I have done quite a few where the wages are significantly less for ERTC and there is no "refundable" portion of the credit because the "non-refundable" calculation is more than the ERTC credit. However, the amount that appears as the total ERTC is the credit you qualify for.
Nice to see a U.S.A. bookkeeping & payroll service company actually addressing this subject.
Thank you!
Candy & Team… thank you so much for this video and worksheet that you emailed me! After watching it I was able to recover
$46,420.38 in ERTC for our small business
(and saved $6,963.06 - 15% that a tax preparer
wanted to charge us!)
Thank you!
Hello Anya, I have that issue now, the company that was helping me, told me already that I qualify but they want me to pay in advance so the will. charge me. 10%. but if they will. deduct from my funds 15%.
I am confused with the form because I found information only of form 7200 but it says is not longer available.
I would appreciate if you help me in how getting the form.
Yay, I'm so glad you were able to use my information to help you claim the credit! Would you consider leaving this comment as a testimonial on Google or my business Facebook page? g.page/r/CXAeLk-LmOeMEAI/review OR facebook.com/AffordableBookkeepingAndPayroll/reviews Thank you!
Filing this form to claim ERC for my firm. Your video helped me IMMENSELY!!! Thank you so much! : )
You are welcome!
Thank you for this video. I was having issues with the numbers coming out right, and realized from your video I had missed the "Non-refundable credit section".
I'm glad you found this helpful!
Great video, thanks so much. While the entire process makes sense, the magnitude of the forms was a bit daunting. You clarified a lot.
I'm glad I was able to help you!
Hi Candy, I am so grateful for this video, even though I have not done the 941X yet, but now I have hope that I can do it.
I hope you can use my example to follow along with the steps. I don't know what period you are doing, but keep in mind the way to calculate has changed 3 times. So for 2020, you'll determine a 50% credit on up to 10,000 qualified wages per employee per YEAR. For 2021, you'll calculate 70% of qualified wages per QUARTER. And if you qualify for 3rd QTR 2021 (or 4th if you are a recovery startup business), you use Medicare wages instead of Social Security wages. It's s bit confusing for many which is why I created videos to help.
T'hanks sooooo much for this, you're video is so much more helpful than anything out there currently
I am glad you found it helpful!
GOOD JOB! STRAIGHT TO THE POINT AND EASY TO FOLLOW
Thank you for your comment. I appreciate it!
THANK you so much for posting this. It saved my sanity!
I am happy to hear my video was helpful!
We are a small Episcopal church and just found out about this. We don’t have nor can we afford a cpa firm. With your easy to follow TH-cam, I think I can forgive out how to do the 941x. . As an accountant, I filled out many 941s. How do I know what quarters I can use? The time we were shut down? You are a lifesaver.
I'm glad my video was able to help you. There are 2 ways to qualify. One is to have a reduction of revenue (or in your case donations, etc). The other is to be under a government-mandated shutdown or reduction of services. Under the revenue reduction, a quarter in 2020 must have a 50% reduction compared to the same quarter in 2019. In 2021, the reduction in a quarter must be at least 20% compared to the same quarter in 2019. 2021 also allows a lookback of one quarter, so if the 1st quarter of 2021 didn't have a 20% reduction compared to the 1st quarter of 2019, but the 4th QTR of 2020 did compared to 4th QTR 2019, you can claim the 1st quarter 2021. If you qualify for 1st quarter 2021, you can also claim 2nd quarter 2021. If for the mandated shutdown, you can claim for the period you could not operate as usual. If shut down a full quarter, you can use the full quarter's qualified wages. If the mandate was lifted mid-quarter, you use the period up to the time you could resume regular activities. If you qualify for one reason for certain periods (such as shutdown) and the mandate is lifted but you can use the reduction of revenue in a quarter, that is fine. As long as one reason applies in a quarter, you can file.
Excellent, excellent video. Extremely helpful information in 10 minutes! Thank you so much.
You are welcome!
Hi Candy. 2021 ERC question. Employee makes 2500 (social security wages) per each of 6 pay periods in the quarter. Health insurance is 1000 per month paid 900 by Employer and 100 by employee via pretax deduction. So qualified wages for the qtr are 18,000 less 10000 = 8000. The PPP coverage period includes 3 of these pay periods. The PPP forgiveness application (approved) did not include health ins, only payroll wages, no non payroll exp. Can I use 7650 of the 8000 towards PPP wages? (2500 + 50) x3 I read somewhere that Section 125 benefits like pre-tax health deductions (and HSA deductions) can be considered qualified wages for ERC in 2021 (added back to social security wages). I think the remaining employER portion of health ins in the 3 payrolls offset for PPP is still allowed even though the wages are used for PPP? I read somewhere an employer could submit health insurance exp even if no wages included for ERC (since offset for PPP) ? We have about 120 employees in 2021, Very picky questions! Thank you in advance !
I can't take the time to do the math for questions I receive (I get a lot in e-mail), but I can give you a general answer. We don't use Social Security wages to determine qualified wages and add back in pre-tax amounts. We use payroll summaries that give the total gross to determine qualified wages for the period (only up to 10,000 for 2020 total, 10,000 per quarter in 2021). Remember to remove any wages where a credit has been received, if any (such as paid sick and/or family leave, opportunity zones, etc). And of course, anything you used for PPP can't be used for ERTC. If you did not claim employer share of medical expense for PPP, you can for ERTC. I hope this answers your questions so you can determine your total qualified wages/ERTC.
Yes this helped ! Thx so much Candy !
@@krisbirmingham3741 You are welcome!
Perfect, just perfect. Answered exactly what I. was looking for. Thank you so much!!
I'm glad my video helped you!
Candy, I was reading the instruction for 941x, I read this part for line 17
Example-Nonrefundable portion of credit for
qualified sick and family leave wages increased.
Following Example-Qualified sick leave wages
increased in the instructions for line 9, you originally
reported a $1,000 nonrefundable portion of the credit for
qualified sick and family leave wages on Form 941,
line 11b, for the second quarter of 2020. You use
Worksheet 1 to refigure the correct nonrefundable portion
of the credit for qualified sick and family leave wages and
you determine that the correct credit is now $2,000. To
correct the error, figure the difference on Form 941‐X as
shown.
Column 1 (corrected amount) 2,000.00
Column 2 (Form 941, line 11b) - 1,000.00
Column 3 (difference) 1,000.00
To properly show the credit increase as a reduction to
your tax balance, enter the positive number in column 3 as
a negative number in column 4. Here is how you would
enter the numbers on Form 941‐X, line 17.
Column 1 Column 2 Column 3 Column 4
(corrected amount) (Form 941,line 11b) (difference) (tax correction)
2,000.00 1,000.00 1,000.00 -1,000.00
from Worksheet 1 Step 2, Nonrefundable portion of credit for qualified sick and family leave wages for leave is $527.54 so I enter this on line 17 column 1,
However Form 941, line 11 b is also $527.54
Does that mean I don't need to fill line 17?
I'm so sorry I didn't respond earlier. I only saw a notification of your comment today. You DO NOT fill out a 941-X to claim sick pay if it was already claimed on the 941. You only fill out the worksheet and claim the credit if you are entitled to the credit but did not yet apply for it. Since the amount is on the 941 already, do not include it in your calculation worksheet/941-X.
This may have been answered as I didn't read all 700 comments 😊... I have all 941 forms filed per qtr from Q4 2019 to Q4 2021 that I am TRYING to address. My question is how did you break out Q1 2020 to get only 3/14/2020 - 3/30/2020 seeing as the filed 941 for Q1 2020 reflects 1/1/2020 - 3/30/2020.
Also, when including Healthcare expenses that are paid partially by business -60% and 40% by employee, what number is reflected on the 941 x form? The total, the 60% or the 40%?
Thank you so much for taking the time to make this video. It is clear, concise and an enormous help! Thank you again
When claiming March wages, you look at your payroll records (payroll summaries or add up amounts from each check) to get the gross PAID March 13-31 and add to the 2nd QTR 2020 return. You do not file a 1st QTR 2020 return.
Secondly, you only include the employer portion of the healthcare expense, and only if not used towards PPP.
Dear Candy, Hi, Good morning! I would like to claim ERC program. But I had received PPP, too. When I put PPP into a quarter, it wasn't enough. (Ex: Q3/2020: $17,948 and PPP fund: $25,610). So I will continue to subtract the money from the next Quarter. Looking forward to hearing from you. Thanks so much. Good day!
When you submitted forgiveness for PPP, did you use 8 or 24 weeks covered period? You'll want to look at the covered period to determine which quarters to use wages for PPP. They don't have to be in 1 quarter unless you had an 8 week period that spanned only 1 quarter. For instance, if you received your PPP in late April, any qualified wages prior to the start date for PPP can go to ERTC as well March 13-31. If you used 40% non-payroll expenses for PPP, you only need 60% of the loan amount from payroll costs. And some non-wage items count towards payroll such as state employer taxes, 401K match, employer paid health care, and worker's compensation premiums. So, spread the wages needed for PPP over the covered period. Anything in excess of the amounts needed and outside of the covered period go to ERTC.
@@CandyMesser Dear Candy, So glad to receive your reply.
I'm quite confused. I received PPP fund: $25,610 on July, 26.2020. And I use 24 weeks to fill forgiveness for PPP Loan. But in Quarter 3 my employees wages only had: $17,948. So I have to use a part of the next quarter's employee salary to deduct. Q4: $29,700. Looking forward to your detailed advice. I really appreciate your help. Thanks a lot. Good night!
Hi, Ms. Candy, My business operating before 2019. So can I claim ERC for Quarter 3 in 2021? Thank you.
@@JackTran99 If you were funded July 26, 2020, your covered period ends January 9, 2021. So you can use qualified wages for 3rd QTR up to July 25 for ERTC. You can also spread the wages needed for PPP in the 3rd and 4th QTRS. And again, depending on what you listed on the PPP forgiveness (if you filed a form that required a breakdown), up to 40% of the loan could be from non-payroll expenses such as rent and utilities. That means only $15,366 is needed from payroll. and as I commented earlier, payroll expenses include state payroll taxes, employer medical, 401K match, and worker's compensation premiums paid in the period. So your actual wages needed would be less than the $15,366. And since you can spread this out across 3 quarters (albeit 1st quarter 2021 would not have a lot of wages (if any) since the covered period ends Jan 9. But if you had any payroll paid between January 1-9, that is also in the covered period. The main thing is you reserve enough wages for PPP forgiveness to meet the required amount and then use the rest of the wages to claim ERTC. If you had employees working in the 3rd QTR that didn't work in the 4th, you'll want to claim their wages for ERTC since they won't be working in subsequent quarters. I hope this makes sense. It's a bit of a challenge to figure it all out, but with time and patience, you can do it.
@@JackTran99 Yes, you can claim 3rd QTR 2021 but not 4th QTR 2021 as the 4th is only for those that began after Feb 15, 2020 called recovery startup businesses.
Great video!
The worksheet by the way is in the last couple pages of the Instructions for form 941-X, if anyone is looking for them.
Yes, it is, but I didn't realize this at first, and doing a Google search didn't bring up the worksheet on its own.
1) If I am only claiming partial wages from the original 941 period then wouldn't the .062 be based off what I am claiming? My qualified wages will not be for an entire quarter. 2) Which line is the actual refunded amount for ERC? Lastly, once the 941X is submitted and a check is received back confirming the IRS has accepted the Form, do we then need to have our tax accountant redo our taxes for 2020 creating a possible risk for additional taxes due because our taxable income went up with the ERC credit and potential interest charges.
1. The calculation of the 6.2% is based on the original wages reported, not your qualified wages, so you must use the figure from section 5 on the original 941.
2. The refund will be the total ERTC. I am not listing lines as the forms have been revised multiple times. Assuming your calculations are correct, it's the qualified wages times the 50% or 70% credit (plus interest). This is broken down into refundable and non-refundable portions.
3. Yes, your CPA will have to amend your prior tax returns for the amount of the credit received. And yes, this will result in additional tax due. I assume the IRS won't charge interest due to the credit being filed later, but I don't know this for sure. But it's a different scenario than failing to pay taxes late on purpose. You didn't know when filing 2020 that you'd receive a credit that needed to be claimed.
@@CandyMesser Thank you. I am still a bit confused on #1 & #2.
1) Any requests for Qualified Amounts on the forms I am entering my 941 Wages less any wages used to forgive my PPP loan. I believe that is correct?. Except you are instructing for purposes of the Worksheet and the 6.2% calculation use the total 941 original wages vs. the Actual Qualified. Will they then deduct the total 6.2% from the original 941 from the 941X refund of 50% of my Qualified Wages? 2) How do they breakdown the 50% to refundable vs. non refundable.. isn't the whole 50% refundable?
@@positiveperksfromasassysma2663 I don't know why the IRS calls the 6.2% of the originally filed 941 wages as non-refundable other than the fact that it was your employer expense for wages paid in the quarter. When you get your refund, the notice will have one line as a tax deduction (the non-refundable amount) and a credit (the refundable amount). When you take the qualified wages multiplied by 50% (for 2020) or 70% (for 2021), you will get the full amount of the credit refunded.
@@CandyMesser I received an erc refund after I filed in July 2023. We redid my taxes for 2020 and I had to pay the irs money because the erc reduced my income for 2020 which I expected. I just received another bill from the irs stating I owe them for penalties from 2020 because the additional money I submitted after the erc payment indicated I did not pay my taxes on time. However, I did pay my taxes on time in 2020.. only because of the erc did it result in a balance due this July. The interest over the last 3 years is only on the balance that I paid this July. Have you encountered this and in your experience what should I do. I did not anticipate this interest charge because the only reason my tax change was because the irs kept changing the rules. This erc rule was not even in effect when I filed my taxes in 2020. Any advise appreciated.
@@positiveperksfromasassysma2663 we do not file income tax returns (1040, 1120, etc) so I haven't had anyone tell me they got penalty/interest notices. I do know the AICPA was pushing for the IRS to make sure employers did not pay penalties due to making adjustments apply to the years the ERTC was for rather than applying the credit in the year received. I would do 1 of 2 things:
1. Write a letter to the IRS stating the interest is due to a recalculation of tax because of receiving the ERTC credit. Request penalties/interest be removed because that is the only reason there is a balance.
2. Call the number on the notice and request the adjustment over the phone. More info can be found at www.irs.gov/payments/penalty-relief
I think that notices are often automatically generated and mailed without any oversight and that you have a good reason for penalty/interest abatement.
EXCELLENT VIDEO! Clear and helpful. Included valuable tips. Thank you, Thank you!!
I'm glad you found it helpful!
THANK YOU THANK YOU THANK YOU!!! I have been researching how to properly fill out this paperwork for a week now! After piecing together all the info on who qualifies and HOW they can qualify, and finding all the necessary bits and pieces of what we need to fill it out (the IRS is usually more helpful for things like this), I STILL had questions on certain sections that I couldn't find answers to. And again, IRS has been very useful in the past with their instructions, but this time I find them lacking. Specifically needed the answers on WHERE do we include the PPP funds, and WHERE do we exclude the owner/family wages so they aren't included as part of the refundable ERC - it doesn't tell you on the worksheet nor the 941x (I thought there would be a line especially for PPP funds, to back out this number but there is not). I didn't want to guess how to fill it out and be wrong. So, after reading the comments, I am glad to know I was on the right track. Again, just didn't want to be wrong and then end up screwing our clients....THANK YOU SO MUCH FOR POSTING THIS - IT HAS BEEN A HECK OF A TIME TRYING TO FIND THE PROPER INFO. (So many companies out there capitalizing on on business owner's ERC refunds by charging percentages of their checks which is not okay. Glad we can file this on behalf of our clients for just our time.)
Thank you for commenting. I'm glad my video was able to help you file and help your clients get the credit they deserve.
Hi Candy. I have 6 quarters to amend. I read somewhere that I should mail each 941-X separately. Should I send each via regular First Class, Certified, or Registered mail. What has been your process? Also, is it just PPP funds that shouldn't overlap with ERTC wages, or should EIDL loan funds used for payroll also not overlap with qualified wages?
Also, I thought I'd share my colleague's experience with his 941-X filing, since a few people had questions in this thread. He filed his 2020 Q2 941-X in early April 2021 and received his check in late Oct 2021, about 7 months later. The check also included 21 days of interest on top of the credit amount. On the 941-X, he check-marked the boxes in Part 2 line 3 and 5.c. He also had included the worksheet in his filing, but I don't believe it's necessary. I guess it didn't hurt his filing.
We have sent them all together when we process for a client and haven't had an issue. Clients have been reporting back that they are getting their checks (albeit each quarter has its own check). I would just paperclip each quarter's 941-X together. We did not send certified or registered mail. And yes, our experience with clients reporting when they are getting checks is that it's taking about 8 months for the forms to be processed. In terms of which payroll dollars can't be used, I've only seen information that you can not use wages that you receive another tax credit for (work opportunity credit, qualified sick/family leave), but an EIDL is a loan you must pay back. I did not see anything saying wages paid with an EIDL loan must be excluded.
In the Worksheet Step 3 (3a) qualified wages - should this include the employer Social Security and medicare taxes as well. Example If the employee wages is $1000, do I enter $1000 or $1062?
Qualified wages do not include employer taxes. It is only the gross earnings of the employees.
@@CandyMesser So the SS and Medicare taxes paid by the employer on the qualified wages are not credited?
@@dr.deepas4178 Not for ERTC. The employer tax paid on the original 941 is calculated to determine the non-refundable portion of the ERTC (not sure why it's called non-refundable as you do get the amount refunded, but it's considered a reduction of your tax liability, the rest of the ERTC is a refundable credit). The ERTC is a percentage of the wages paid to employees, not the employer tax paid.
This is a great video and Thanks for the help.
I have Question about the first quarter of March 12th to march 31st 2020. The ERTC credits started so late in the first quarter of 2020 began march 12th. is the irs required all business to include the first quarter adjustments on with the second quarter adjustments, and file both on the second quarter 2020 941x . I prepared separately 941x 2020 march 12 to march 31. Please let me know Do i need to file both on the second quarter 2020 941X or i will send it separately. As I saw this you mentioned first quarters in the second quarter 2020. I have not mailed my erc 2020 yet and i am mailing end of this week.
I saw your question in Messenger first and responded, but replying here as well. You do not file separate returns for March and 2nd QTR. You add March 13-31 on the same form. You'll see on the worksheet it asks for wages for each period separately and then you add them together to determine ERTC. There is also one line on the 941x for the 2nd QTR wages and one line for March 13-31. There is no ERTC credit allowed for 1st quarter, so you claim March on the 2nd QTR filing.
Thank you so much for a very useful video. WIll I need to amend my 2020 and 2021 income tax returns to reduce wages for the amount of the credits we received for those years?
Yes, when your credits are received, your original returns will need to be amended to reduce your payroll expenses.
can you please give an example of what we should write at the bottom of 940x reason tp explain?
Claiming the ERTC due to a X% reduction in 2020 (or 2021 - whichever applies) compared to the same quarter in 2019, OR Claiming ERTC due to mandated government shutdown affecting more than a nominal portion of the business (whichever reason applies for your case). No wages claimed were used for PPP forgiveness.
Dear Teacher Candy, Good morning! Last night, I met a old friend. He started his own Nails Salons Business in Feb.2021. Can he apply for ERTC follow the Recovery Start Business program? Looking froward to hear your good news. Thank you & Take care.
If the business began after February 15. 2020, they can claim as a recovery startup business. If before, no.
This was an excellent video. I am confused about why the IRS makes us separate the ERTC into refundable and nonrefundable on the 941x when the guidance says its 100% refundable. Thanks for the info.
I am confused as well. In the long run, you have the full credit on the 941-X.
Your videos are excellent. Thank you ! Volunteer at a church. 2021 PPP loan forgiven - only payroll support submitted unfortunately. Minister salary and housing allowance allowed for PPP loan but not for ERC since ERC requires social security wages. Am filing Q1/Q2/Q3 2021Form 941-Xs to claim ERC. Can I offset the minister salary/housing allowance incurred during the 2021 24 week PPP coverage period (and included in the payroll support submitted for forgiveness) against the PPP loan amount and then use the remaining amount of PPP loan to offset qualified wages in 2021 ERC calculation? I could make note of this minister offset on the form 941-X. There is really no double counting of wages. Thank you again !
You can apply the wages paid as it works best in your favor. So if something doesn't qualify for ERTC, but it can be used for PPP, do so. 🙂
@@CandyMesser Thank you So very much !
Sincerely appreciate the detailed explanation.
You are welcome!
One last question that I had was how detailed do we have to be in line 37 (941-x)? Do we have to show how PPP loan was deducted to calculate the qualified wages and how much PPP amount is leftover to be used to deduct from the qualified ERTC for future quarters?
Thank you 🙏 for all your help!!!!
We just put a description for why they qualify for the ERTC (saying the percentage of revenue reduction or the mandatory reduction/shutdown of services). If there was a PPP in the same period, we state no wages used for PPP forgiveness were included for ERTC.
Can you do a video that shows how to claim the credit on form 941 and not 941X? For businesses that have not filed payroll tax as of yet for 2020 or 2021?
That is a rare situation as most have already filed, but yes, I can do so. I am away from my computer for a few hours, and I have quite a bit on my plate today, but I will get it recorded as soon as I can.
@@CandyMesser This is my current situation as the owner of 3 small businesses that started between 2017 and 2020! I am still trying to figure out how to claim it for my business that started in 2020. Thank you so much for your quick reply.
@@booshiesupport Things have been a bit crazy today. I need to pull together information to demonstrate the filings and I haven't had the chance yet. If I can't get it done today, I will try to have it recorded by early next week.
@@CandyMesser That would be perfect for all of us out here! You're so informative and your information is immensely helpful. I'm sure the rest of your community would agree that you lay things out simply. Thank you
@@booshiesupport I have uploaded the video and it has to finish processing. But once done, the link to watch is th-cam.com/video/CqQv3A6x2FE/w-d-xo.html.
Really appreciate your detailed help. Everyone else teases you with some information and then tries to sell their service. We are a small church who lost a lot of members. One question. Several churches have hired a CPA to do this. The CPA said they qualify under the gov't closing mandate. I checked with our county Bd of Commissioners and there were no mandates in our county or state to close the churches. Our diocese made us close. (rightfully!) I don't think we qualify but the other churches are paying the CPAs to do it. What am I missing? Thanks
You must have been under a government-mandated shutdown. The IRS is planning on auditing for fraud, so even if it's paid out now, it may be required to be repaid if found they did not qualify. The guidelines state:
Orders, proclamations, or decrees from the Federal government or any State or local government may be taken into account by an employer as “orders from an appropriate governmental authority” only if they limit “commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease 2019 (COVID-19)” and relate to the suspension of an employer’s operation of its trade or business. (Based on this preventing religious gatherings, you would qualify IF under an order that meets the requirements). Orders that are not from the Federal government must be from a State or local government that has jurisdiction over the employer’s operations. These orders are referred to as “governmental orders.” Whether orders, proclamations or decrees are governmental orders is determined without regard to the level of enforcement of the governmental order.
Governmental orders include:
• An order from the city’s mayor stating that all non-essential businesses must close for a specified period;
• A State’s emergency proclamation that residents must shelter in place for a specified period, other than residents who are employed by an essential business and who may travel to and work at the workplace location;
An order from a local official imposing a curfew on residents that impacts the operating hours of a trade or business for a specified period;
• An order from a local health department mandating a workplace closure for cleaning and disinfecting.
I don't think a Diocese falls under what is considered a government order, so if no other order was in place, you may not want to file. If you do, be prepared to prove your position.
CANDY, CAN YOU PLEASE GO OVER IN DETAILS ON HOW YOU GET THE WORKSHEET 1 PART 3c DONE? I TRIED LOOKING UP THE WORKSHEET BUT ITS SO CONFUSING. THANKS
I assume you are talking about 2020 up until 2nd QTR 2021. The worksheet was the same process until the 3rd QTR 2021. But I believe you are asking about how to determine qualified wages. There are different rules for 2020 and 2021, so it gets complicated. It may still be hard to explain it here. You may want to pay for a consultation for one-on-one direction. If so, please call my office at 310-534-5577. But I'll do my best to explain it here.
For 2020, the max wage allowed is $10,000 with a 50% credit for ERTC. You also can't use the same wages for ERTC and PPP. So take the wages for your employees each quarter and look at your PPP funding date and calculate out 24 weeks (assuming that is the period you used for forgiveness). If you have enough wages in 2nd QTR 2020 plus March 13-31, 202 to get the full ERTC for your employees, don't use wages for PPP until 3rd QTR (assuming you'll have enough for PPP in the remaining weeks). If an employee didn't have the full $10,000 in 2nd QTR, and if wages remain after applying to PPP, you can submit the 941-X for subsequent quarters until the max is used.
For 2021, the max is $10,000 per quarter and you calculate 70% of the wages for ERTC. If you had a PPP in 2021, you do the same as I described above and make sure you don't use the same wages for PPP and ERTC.
I did have another video that explained how I did this for a client for their 2020 filings. You can watch it at th-cam.com/video/ExVnqFEnOa4/w-d-xo.html
Thank you so much for this video. I have an amount in 11b on my 941 - 2020. Do I need to enter that onto my 941-x and is it a negative or a positive amount? Thank you.
Hi Melissa, an amount on 11b means you claimed qualified sick and family leave for some wages paid. You do not list this on the 941-X, however, you must reduce qualified wages for the amount you used for this credit as you can't double-dip. However if you had a PPP loan that you also have to reserve wages for, you can put the wages used for qualified sick towards the PPP so as to not have to reduce ERTC wages.
@@CandyMesser I love you. The calculations are easy enough. I'm a comptroller and our PPP forgiven loan was received in 2021 The fun part is we are choosing the supply disruption and detailing it and documenting is going to be fun. Thank you so much!!!!!
@@MELISSAEICHINGER You are welcome!
Candy, thank you for the great video. One quick question. I noted that the line 36 checkbox was marked on 6:55 of the video. I was wondering if it was checked for a particular reason.
My business did not have any reclassified workers for the period so I should leave it unmarked.
No, that was an error and I put a note in the description to disregard that checkbox.
Thank you for sharing with us. Can you tell me where is the number 19494 from line 3C coming from?
It was a client's figure for their qualified wages for March 13-31, 2020. I used an actual client's information for the example.
Thank you for this video, It is unbelievably helpful! I have two questions.
first, I am filling out the form for 2nd Q 2020 and I see that 2C on the worksheet 2 asks about qualified wages from March 13-31. What are the criteria for qualifying wages in that time frame? Are you automatically able to claim all wages from that time period if youre doing a 941X for 2ndQ and you have not reached the $10,000 threshold per employee?
second, you gave an answer to someone else below that I don't exactly follow. you said "If you qualify for 1st quarter 2021, you can also claim 2nd quarter 2021" Are you saying that you can claim a quarter that you wouldn't otherwise qualify for as long as you qualify for the previous quarter? I will qualify for 2nd Q 2021. Here's a copy of your answer I am referring to
Candy Messer
5 months ago
I'm glad my video was able to help you. There are 2 ways to qualify. One is to have a reduction of revenue (or in your case donations, etc). The other is to be under a government-mandated shutdown or reduction of services. Under the revenue reduction, a quarter in 2020 must have a 50% reduction compared to the same quarter in 2019. In 2021, the reduction in a quarter must be at least 20% compared to the same quarter in 2019. 2021 also allows a lookback of one quarter, so if the 1st quarter of 2021 didn't have a 20% reduction compared to the 1st quarter of 2019, but the 4th QTR of 2020 did compared to 4th QTR 2019, you can claim the 1st quarter 2021. If you qualify for 1st quarter 2021, you can also claim 2nd quarter 2021. If for the mandated shutdown, you can claim for the period you could not operate as usual. If shut down a full quarter, you can use the full quarter's qualified wages. If the mandate was lifted mid-quarter, you use the period up to the time you could resume regular activities. If you qualify for one reason for certain periods (such as shutdown) and the mandate is lifted but you can use the reduction of revenue in a quarter, that is fine. As long as one reason applies in a quarter, you can file.
Hi Doreen - to answer question #1: You qualify for March 13-31 if you can claim 2nd quarter due to the reduction of income or mandated shutdown. Rather than having a claim for the short period of 1st QTR 2020, they added that period on to claiming 2nd QTR 2020. So if your employees don't meet the $10,000 max, you can use their wages for that period to claim more for ERTC.
For question 2: because you wouldn't know if you'd qualify to reduce payroll taxes in the quarter until the end of the quarter, the rules changed and you could use the prior quarter as a lookback period. So yes, if you qualify for 1st QTR 2021 but not 2nd 2021 with the income reduction or shutdown rule, you can use the alternative quarter to claim it.
@@CandyMesser thank you Candy!
@@DoreenFleischman You are welcome!
Hi there, great tutorial. I was wondering about 3d, qualified health plan expenses, and how come no one seems utilize this refundable portion? Also, is it okay to back out the PPP loan over the course of the three quarters in 2021 however best maximizes the ERTC qualified wages? For example; I have 1 million in qualifed wages over the 24 week period, and $250,000 forgiven PPP loan, can I spread it out over the PPP loan period however will best serve the ERTC?
Hi Miki, I have quite a few clients who have employer medical expenses that are being added for ERTC. But some used it for PPP forgiveness, so they aren't using for ERTC. And yes, you can spread wages across the 24-week covered period for PPP forgiveness to give you the best benefit for ERTC.
You've helped tremendously. Thank you!
You are welcome!
Our original 941's and 943's filed include a family member's wages. On the 941X and 943X, where do you subtract those wages and tax payments, because they do not qualify for ERC?
You would reduce the qualified wages you report on the worksheet/941-X. They are subtracted before ever being listed on the documents.
Would you not include the employer share of social security tax on the worksheet, line 1H?....thanks. Jon....if one was checking box c on the 1st page of the 941-x.
Yes, your final calculation for employer share of SS tax would go on 1-H. In most cases it is the same as on line 1d
Amazing video, thanks for so much detail
You are welcome!
Thanks for the detailed video! I have a question about my particular situation: I purchased a business (asset sale so we took over all history of the business) that closed December 2020 and would like to apply for this ERTC. The previous owner and her son were on the payroll until December 2020. Since they are technically not owners any longer, is it correct that I can include their wages in the calculation?
I'm not sure I know enough to answer the question. But when you made the purchase if you then began payroll with your own EIN (or already had one) and added them as employees, it is obvious in this case that they are not owners of the business with that EIN. I am assuming that is what you did, but I want to make sure. If you took over their EIN (I'm thinking not if you say asset purchase), it could be a bit more complicated if a change of ownership was not reported to the IRS. If the former is the case, yes, you may claim their wages for ERTC.
@@CandyMesser Sorry, I screwed that up. We purchased the business as a STOCK sale, NOT an asset sale. It has been the same EIN for the history of the business. Sorry for the confusion.
@@NickMace-l5z It sounds like you would not qualify since your company has been in existence since prior to Feb 15, 2020, and only acquired additional resources that were added to the company already operating.
@@CandyMesser I am totally confused by your response. Could you tell me why the company wouldn't qualify? Let me start my question over if that helps with my mistake corrected and hopefully with more clarity of the situation:
I have a question about my particular situation: I purchased a business (STOCK sale so we took over all history of the business) and the sale occurred in December 2020. The business is still in operation and we do qualify for ERTC per my calculations of the decreased revenue over 2020 and 2021. The previous owner and her son were on the payroll until December 2020. Since they are technically not owners any longer, is it correct that I can include their wages in the ERTC calculation?
@@NickMace-l5z I thought you were asking if you qualified as a recovery startup business, and based on the facts you had presented regarding the company having been in existence, my answer was no since your business did not begin after Feb 15, 2020. You didn't mention income reduction as the reason. If the company had at least a 50% reduction of income in 2nd, 3rd, and/or 4th QTRs of 2020 compared to 2019, you can qualify for that year. If a 20% reduction in 2021 over the same quarter(s) in 2019, you can qualify. But if the sale occurred in Dec 2020, I assume the prior owner and son would not qualify for 2020 if she was a majority owner (owns more than 50%). If she did not own more than 50%, their wages would count toward ERTC. I hope this better answers your question.
u should do another video about doing an amended of a previous 941X. for example to take retention credit on tipped wages or officer wages if each is 50/50 s-corp owners and unrelated
I hadn't thought of doing a video on how to amend a previously filed amended return. Great idea!
@@CandyMesser
i'll await the vid, thks
@@Boris_Greca I will prepare the content to record today. I'm not sure exactly when it will be recorded, edited and uploaded, but I'll let you know.
@@Boris_Greca Video was recorded. Hopefully, we can get it uploaded today or tomorrow. My admin who ads the intro/close had surgery yesterday. Depending on how she feels, she will upload for me soon.
@@Boris_Greca Hi Boris, the video has been uploaded. I hope it answers your questions. th-cam.com/video/B8Bq1pziWIg/w-d-xo.html
This is the best informational video out there. I'm not sure where or how to apply the PPP credit the clients received. Also, on some companies that pay the health insurance premiums in full for the employees where and how are these calculated? I want to help my clients, I just don't want to file this ERC incorrectly. Thanks for any help.
In terms of PPP, you must reduce qualified wages by the amount put to PPP. However, most claimed PPP over 24 weeks, so you can spread the wages for PPP over multiple quarters to help them get the ERTC credit in multiple quarters (this is most important for 2021 since they can now claim wages up to $10,000 per quarter rather than for the year in 2020). Also, whatever the expense for medical paid by the employer can be used for ERTC (if not used for PPP).
Oh my, one more, lol... The March 13-31 wages, is that total included the total Qualified wages for the retention credit on the 941x 2nd Qtr line 30? Or do I just separate those wages on line 33a? And do include those March wages as part of the calculation for the nonrefundable portion of employee rentention credit? How do I get the March wages X .50 into the refundable credit? Almost at the finish line. Lol.
I'm so sorry for the late reply. Your comment only now popped up for me to review and it's been more than a month since you left it. I'm not sure how that happened.March 13-31 is not included on line 30 of the 941-X. They are listed on line 33a. You do not include them for the calculation to determine the non-refundable credit. Only the wages on line 5a of the 941 (through 2nd QTR 2021) or 5c for filings after 2nd QTR 2021. You'll add March qualified wages to 2nd quarter and multiply this by .5 to get total ERTC.
I did like this video very much. I am working with the worksheets that were revised on 7-2021. They are a little different but still able to find where the figures go. In the video there was nothing mentioned about where to apply the PPP wages. Is there a spot to put that?
You don't apply PPP wages on the 941. You reduce the qualified wages by what was used for PPP. For example, if you had $75,000 in wages, but $20,000 was used for PPP, and no remaining wages were greater than the $10,000 per employee allowed, you would have $55,000 in qualified wages. But the worksheet you are using is for 3rd QTR 2021, but not earlier. Most clients who got the PPP in 2021 don't have a qualified period into 3rd QTR. Make sure you are using the correct worksheet. And I do have a video with the updated info: th-cam.com/video/Qm2WCp3szB0/w-d-xo.html
Thank you for your video. After much hair pulling I almost understand. What I am not quite understanding is 3a on the worksheet/Line 30 on the 941-X the number comes from my SS Wages for that quarter. But on Line 3c from worksheet to line 33a on 941 - X I am unclear as to where that number comes from? Is that the amount of monies used from the PPP loan for that quarter?
Line 3a on the worksheet may not be your Social Security Wages reported for the quarter. You must remove any owners/family wages and anything over the maximum allowed per employee. For instance, if filing in 2020, you could only claim the credit on the maximum of $10,000 wages per employee for 2020 combined. Most businesses paid more than that to many employees for the qualifying periods. So one quarter may have a much higher qualified wage figure compared to a later one which is claiming the remaining wages available. Also, if you had PPP forgiveness, you can't use the same wages for ERTC and PPP, so you must reduce the wage amount in 3a (and what will go on line 30). Many of the filings we have done for businesses have different numbers in 3a than what appeared on the originally filed 941-X
I am unclear on ownership eligibility for ERC. My business is an S Corp with 2 owners 50% each. The owners are brothers. Since neither of us is more than 50% owner, do our wages qualify?
Yes, since you are 50/50 and neither is a majority owner. The related individuals' rule comes into play for ERTC if there is a majority owner.
This is excellent information! Very useful!
I'm glad it was helpful to you.
How does a PPP loan come into play when figuring "qualified wages"? This is not mentioned in the video.
Here is the link to a video I created giving an example. th-cam.com/video/ExVnqFEnOa4/w-d-xo.html I suggest you first see if you have 40% non-payroll approved expenses. Then see what non-wage payroll expenses you can use for PPP (state payroll taxes, employer paid health care and/or 401K match, and worker's compensation premiums). Once you have these amounts, subtract from your loan amount to see the amount of wages needed for forgiveness. Start with wages that can't be used for ERTC (amounts over $10,000 per employee per quarter or year depending on if it's in 2020 or 2021), and wages for owners of more than 50% of the company and related individuals). If this isn't enough over the covered period, you'll need to take wages from one or two quarters over the period to get full forgiveness. You'll want to figure out how much to use to maximize ERTC in the quarters while getting full forgiveness.
Hello Candy,
On line 36 you checked the classify worker. Is this okay to the IRS? Should we have checked line 35 because we are essentially correcting an "over-reported amount"?
I just saw the notes. Sorry.
@@sunnybanails3794 No problem. If I hadn't mentioned it in the video in the first place in error, you wouldn't have had to ask. But it was a lot of effort to record the video, so I didn't want to re-record just to take that part out. Thanks for your understanding!
Thanks. But why box D is checked on line 5? The claim does not affect taxes withheld from employees .Box C should be checked because it's a refund for the employer's share of taxes!
The 941-X is not being filed due to a mistake in the reporting of the tax. This is a credit the government is offering based on wages filed in previous quarters. There is no correction to the employer's share of taxes. Box C also says the correction can't be traced to employees or they didn't sign a consent to claim the tax. But again, the tax is not due to an error in reporting, it is a method allowed to get the ERTC for wages paid. so we are using D to complete the returns.
@@CandyMesser If you check step 3 on the worksheet to calculate the credit , The nonrefundable portion of the credit reduces the employer's share of social security taxes to zero and the remainder is the refundable portion, So the credit mainly affects the employer's share of taxes. That's why box C should be checked .
@ahmed abdallah I think the difference is that I didn't show an example of someone having the non-refundable sick and family leave (I even mentioned that in the video), so the amount of the Social Security on line 1l carries through at the bottom on lines 3i and 3j and remains non-refundable. So far, I have not had anyone that paid out the sick and had to include that amount in the calculation, so line 3j is still listed as non-refundable on the 941-X. So, if you feel box C is better, please use it, but I have used D. To be honest, some of these situations aren't always completely clear. In the long run, the IRS wants to make sure that anything refunded is not due back to the employee (or they certify they have repaid anything withheld in error). But the ERTC doesn't have a bearing on withheld amounts from employees. I appreciate your response to my video. I don't want to cause any confusion.
Hello. Can nonrefundable portion be refunded as well or is it just refundable portion can be refunded as a check back?
Yes, the non-refundable portion is also given to you. I don't know why the IRS set up the filing this way and called it refundable and non-refundable other than the fact that non-refundable is based on the employer tax you paid, so when you get your paperwork explaining the refund, it will say this portion is a reduction of the tax due. The refundable portion will be listed as a credit. But you will get back both portions to equal the total ERTC you calculated (assuming there are no errors).
Hi Candy, your video is FANTASTIC! Question, line 30 on the 941x is that total wages reported on 941 or are the ineligible wages backed out. For a small business that paid the owner/officer - his wages are included on the quarterly 941, but because he is an officer, it is my understanding his wages are not eligible for ERC, so when completing the 941x for all other eligible wages, does it include what was reported on the 941 with the officer wages included, or only the amount of what total wages are eligible wages. Example - 941 filed $50,000. Officer wages $10,000 not eligible for ERC. 941x line 30 enter $50,000 or $40,000? Thank you!
It's not if someone is an officer that wages are ineligible. It's if they are a majority owner (greater than 50%). So if he is a majority owner, line 30 is the total qualified wages, not total payroll.
Hi Candy. I sold my restaurant in 2022. If I claim ERTC via 941-X for 2020 & 2021 (the I time owned the business), how can I ensure that the refunds get sent directly to me? My understanding is that the refund checks are sent to the business address on the 941. Can I put my personal address on the 941-X? Will the IRS then consider that the new business address? I wouldn't want to mess up any future 941 filings for the new business owner. I appreciate any insights.
Is the new owner setting up their own corporation (EIN)? If so, you can submit a change of address form with the IRS (8822-B) with your business name and EIN and have it go to your home address. Otherwise, it would be up to the new owner to forward the funds to you if received at the restaurant. By changing the address on the business name and EIN, it shouldn't affect the new owner if they have their own company name and EIN. The IRS doesn't look at the address to begin with, they look at the entity name. I hope this helps!
How did you calculate 3C?
Those were the qualified wages for the employees paid between March 13-31, 2020.
Candy-
Do you deduct qualified wages assigned to PPP forgiveness and remove owners wages and related on the worksheet Step 3 line 3a? other areas too?
You don't remove it on the worksheet. You remove as you are calculating your qualified wages. Once you have the total qualified wages you can use, that is the number transferred to the worksheet for part 3 line 3a. It is not accounted for in any other area.
Hello, with the help of your video and comments, I was able to submit my 941x's to claim the ERC for a couple quarters of 2020. I now read that the erc would offset wages prompting a amended tax filing for my business and in my case, revised k1 for sub s and finally amended personal tax filing for 2020. My question is that of timing. Since the amended 941's have not been approved, and I have yet to learn if the funds will be forthcoming, it would be premature to make all the related amendments to wages yet some of the writings suggest the amended tax returns should be done coincident with the amended 941 claiming the ERC. Are you aware of any guidance related to the timing of the amendments of corp tax and k1 which would be related to the amended 941's?
Yes, your original return would be amended based on the credits you are granted, however, I think it prudent to wait until those funds have been received to make sure they are the amount you calculated. Once you have the payments (or credits if requesting an adjustment to future tax liabilities), you will know the total amount the IRS is issuing in credits and amend the return/K-1s at that time. But ask your tax preparer their opinion as well.
@@CandyMesser Great! Thanks for all your help and such a quick reply!
@@tonyt8796 You are welcome!
how to calculate refundable portion of employee retention credit (line 26) how do u get this number? help
You first must find the non-refundable portion, For 2020 and 1st 2 quarters of 2021, you take total Social Security wages (and tips if applicable) on line 5 of your 941 and multiply by 6.2%. For claims beginning with July 2021 wages, you take Medicare wages and multiply by 1.45%. You take your qualified wages and multiply by 50% (2020) or 70% (2021) to get total ERTC. Subtract non-refundable from total ERTC to get the refundable portion. If you want help, you can reach out to my office for a consultation ($250) and they will walk you through the process, or if you'd like us to do the claims for you, there is a fee per quarter. You can contact my office at 310-534-5577 or contact@abandp.com.
Good morning, my dear Teacher Candy, I met my girl friend at the party last night. She filed S-Corp taxes and have paid salary to her employees, can she claim ERTC? Looking forward to receive your advice. Thank you.
I don't have the information needed to know if she qualifies. But, if she was under a government-mandated full or partial shutdown, had a reduction of income of at least 50% in 2nd, 3rd, or 4th QTRS of 2020 compared to the same quarters in 2019, had at least a 20% reduction of income in 4th QTR 2020, 1st, 2nd, and/or 3rd in 2021, or began her business after February 15, 2020, she could qualify.
@@CandyMesser Dear My teacher Candy, thanks for your prompt reply. I strongly appreciate your help. My friend's business has all the criteria such as 50% reduction compared to 2019 for Tax 2020, and 20% reduction compared to 2019 for Tax 2021. I just confused, can she claim ERTC with business fill Form 1120-s tax return? Have a nice day and take care my dear Teacher.
@@JackTran99 She must claim the credit with a 941-X form. Once the credit is received, the original 1120-S will have to be amended.
@@CandyMesser Ok.Thanks for your good advice.Have a nice day, my dear Teacher Candy.
@@JackTran99 you are welcome!
Box 2 clearly states if you are filing for a refund you cannot use Box 2. I am very confused by this
I am not sure where you are getting the information you can't use box 2 to file for a refund. The only thing it says you can't do is to use the claim process if you underreported any amounts. Specifically, it uses the word refund in the directions which say "Check this box if you overreported amounts only and you would like to use the claim process to ask for a refund or abatement of the amount shown on line 27. Don’t check this box if you’re correcting ANY underreported amounts on this form." So you may check box 2 to claim a refund of the ERTC.
Hi Candy again, when I thought I can finish up and enter the amounts from the worksheets into the 941 X for each qualified quarter, I ran into another problem. I can not find any amount in 941 line 21 and 24 (for 2nd Q 2020). I informed our payroll provider and was told that they do not know the qualified wages for the ERTC.
You will have to determine the qualified wages for each quarter. I don't know what periods you are are doing, but it's a max of $10,000 total for 2020 per employee but $10,000 per quarter per employee in 2021. You can't use the same wages for PPP and ERTC. If you need help, contact our office for a quote based on the number of employees paid in qualified quarters each year. 310-534-5577 or contact@abandp.com.
My church had a 30% drop in revenue in Q2 2021 compared to Q2 2019, but all other quarters didn’t meet the revenue qualification. My understanding is we can claim the credit for both Q2 and Q3 2021 based on the Q2 decrease? If so, what reason do you put on 941x for Q3? Q2 I would say I am claiming for a 30% income reduction, but in Q3 do you say you are claiming it due to Q2 income reduction?
Yes, you can say for Q2 that you are claiming it due to a greater than 20% reduction for that quarter compared to the same quarter in 2019. For the 3rd QTR, you can say claiming the credit based on a reduction greater than 20% using the alternative quarter qualification (2nd QTR 2021). Many churches were also under government-required shutdowns (or partial shutdowns). If you were unable to meet due to mandated orders, you can qualify for those quarters as well for the period you were not allowed to have in-person meetings, etc.
Your video was super informative and easy to understand .. I'm in the process of gathering all the needed forms to process the 941-x's. I'm struggling finding the correct 941 worksheet that you share in the video. Any tips on locating them would be greatly appreciated. Thanks in advance.
You can e-mail my staff at contact@abandp.com and they will e-mail it to you. I know it's not easy to find, so I have asked my staff to send to anyone requesting it.
Where do I mail the 941x to? and do I send any other documentation with it? Thank you!
It depends on where your business is located which address is used, so you'll have to determine it from your location (see below). Also, you only mail the 941-X forms, now supporting info. If filing more than one quarter, clip each quarter together but you can send them all in the same envelope.
Find where you are located and use the below address:
Connecticut, Delaware, District of
Columbia, Florida, Georgia,
Illinois, Indiana, Kentucky, Maine,
Maryland, Massachusetts,
Michigan, New Hampshire, New
Jersey, New York, North Carolina,
Ohio, Pennsylvania, Rhode
Island, South Carolina,
Tennessee, Vermont, Virginia,
West Virginia, Wisconsin:
Department of the Treasury
Internal Revenue Service
Cincinnati, OH 45999-0005
Alabama, Alaska, Arizona,
Arkansas, California, Colorado,
Hawaii, Idaho, Iowa, Kansas,
Louisiana, Minnesota,
Mississippi, Missouri, Montana,
Nebraska, Nevada, New Mexico,
North Dakota, Oklahoma,
Oregon, South Dakota, Texas,
Utah, Washington, Wyoming:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0005
Special filing address for
exempt organizations; federal,
state, and local governmental
entities; and Indian tribal
governmental entities, regardless
of location:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0005
@@CandyMesser Thank you very much for your reply! I am mailing it out today - fingers crossed! 🤞🙏
@@TiffanyV-e6g You are welcome!
Thanks for this helpful video. I just realized that I did not check box 5d when I sent in my qtr. 1 and qtr. 2 941x. I only checked box 3. Will my refund be rejected? Should I send another copy of the 941x with the box checked? I'm wondering if this is the reason I have not received a refund.
The IRS is VERY behind in processing the refunds, so I don't think not checking the box is why you haven't had a response. If you were denied and it had been reviewed, you would have received something in writing. Technically, you are supposed to check a box in section 5 if you marked "claim." But since the ERTC has nothing to do with the employer and/or employee taxes withheld, maybe they would process it without a box checked (but I don't know if this is the case). BUT, if you send in another form, you wouldn't want to list any of the number adjustments since you've already filed. You would only mark a box in section 5 and put a note in the description section that you failed to include a selection. If the IRS completely rejects your 941-X though, submitting one with only the box in section 5 checked won't help as they would not have the numbers to process it. But if you put numbers on a 2nd return, it may be processed twice forcing you to file another amendment and return the 2nd credit. I almost think it's better to wait to see if you get the refund even if a box wasn't checked. But again, I'm only guessing what should be done in this case. There is no info on how to handle this situation. I'd suggest calling the IRS to ask, but most of the time, you can't even get through and put on hold. And if you miraculously do get on hold, you'll wait a very long time, and the agent may not have an answer. The IRS is taking up to 8 months to process forms (something a client submitted in March just had a letter of acknowledgment (not ERTC related) just last week. So, if it hasn't been that long since you submitted your request, you may want to wait to see what happens.
Hi Candy!! thank you for your videos they are really informative and useful!! I have a question.. I'm filing the 941X to getting the ERC but the total wages are not the same s as the qualified wages which will be the amount on 18a 941X? ( Non refundable portion) Because in my logic would be the one for the qualified wages but if I follow the instructions for the calculation in worksheet 1 should be for the total wages thank you so much!!
The non-refundable calculation is not based on qualified wages. It's based on the wages originally reported on the 941 and finding the employer share of the Social Security taxes. The original wages and qualified wages can be very different (removing majority owners and/or relatives, wages used for PPP or for other credits). If you follow the instructions on the worksheet you should end up with the correct information reported.
Thank you so much for taking the time to make this video! It is so helpful. Would you please be able to provide the 941-x form for 2021?
I'm not sure if it matters which revised version you use but wanted to be sure I used the correct version if it matters? Thank you again for providing this information.
The most recent form was released in July 2021. If that is not the form you have and you'd like us to send you one, please e-mail contact@abandp.com and request it. There is no way for me to attach it here.
All my stuff is approved but there asking me for my original 941 form..my accountant that filed it is no longer with me..I only have the adjust 941 form..any thoughts on how would I get my original form ?
That's odd. If it was filed, they wouldn't be asking for it, so it seems it wasn't filed (assuming it was supposed to be electronic). If mailed, maybe it was lost. And it sounds like your CPA didn't send you a copy if you are asking about what to do. I think you first need to try to reach your prior CPA and tell them the IRS is requesting it and you need the copy. Hopefully, you can reach them and they will send it to you. If you can't get a copy, you'll have to recreate it from your payroll data.
Hi, Good afternoon. My dear Teacher Candy, I had a friend, she had a Nail Salons business. In 2019 she paid salary to employees by 1099. But in 2020 she paid by W2. So can I help her claim for ERTC program? The revenue 2020 is greatly reduced (-67%) because of Covid 19. Looking forward to receive your good news. Thanks a lot.
Yes, it doesn't ask who was on payroll in 2019. It only looks at revenue reduction. So with the reduction and staff on payroll, she can claim ERTC.
@@CandyMesser Thanks so much for your good advice my dear Teacher Candy. So I can help her apply to claim all 3 Quarters in 2020.
@@JackTran99 You are welcome.
What if the company did withhold the employee social security & Medicare tax? If you do the 941-X to claim the ERC which option you click ? And do you have to return the tax to employees when the company receive back the refund check. I am amending the 2021 941 forms in 2022 and looking to receive a refund.
I am so sorry for the late reply. This did not show in my notifications until now. You did withhold the Social Security and Medicare tax from employees, but the credit is not based on employee taxes, and you do not refund them. The credit is based on the employer share of the Social Security tax for 2020 and the first 2 quarters of 2021, and Medicare tax for 3rd and 4th QTRS (for those who qualify for 4th). So you should select select 5D on the 941-X. The credit is calculated on qualified wages. The non-refundable portion is the amount of employer paid Social Security or Medicare tax on the original 941. The refundable portion is the total ERTC less the non-refundable portion.
Candy, you mention below several times that we have to list out the non-refundable credit that was the amount of the employer's share of SS tax but that we can also get that amount back as a credit. If we are only completing lines 18a for nonrefundable portion (let's say it is $5,000) and line 26a for refundable portion (let's say it is $35,000) would I then put $40,000 (negative) in line 27 or would I put $30,000 (negative) as my total? I know we also fill out line 30 for qualified wages too.
Hi Wade, you add the amounts on lines 18a and 26a to put the total ERTC on line 27 (you'll see this on the worksheet you use to prepare the figures to put onto the 941-X). Both amounts are negative in column 4 (if your number is positive in column 3 you put it as negative in 4) so you would put -$40,000 on line 27.
18a is the Nonrefundable portion of SS wages (shown as a negative number). If its "nonrefundable portion" then why can it be added to line 27 (as credit due)?
Thank you again for all your help! This has helped a lot!
You put the non-refundable on line 18. You put the refundable portion on line 26 and they add together to get the total credit on line 27.
Hi Candy. For 2020, does a business only count FTE? What about part time? I’ve been reading that the rules were amended to include part time employees. Thank you so much.
I think there is a little confusion. For 2020, if you had 100 or more full-time employees, you could only use qualified wages for anyone you paid but they weren't working. But this was for any employee who was paid even though they were unable to work. So if you had part-time employees compensated for the closure of the business and they couldn't work, they would also qualify for ERTC. In 2021, the figure changed to 500 full-time employees. So if you meet the number of employees (100 full-time for 2020 and 500 full-time for 2021), only use wages (up to the max 10,000 per YEAR for 2020 (March 13-Dec 31) or 10,000 per quarter for 2021) for employees who were compensated even if they couldn't work. If you don't have this number of workers, you can use wages for all employees up to the max based on how you qualify (reduction of income - can claim full quarter, OR mandatory reduction of services - claim for the impact period).
Thank you so much!
@@laylas7517 You are welcome!
What if the 941 was never filed for the quarter I'm seeking the employee retention credit? Can I still get the credit if a 941 was not filed in Q1 2020 or Q4 2020? No 941 was filed for all of 2021 either.
The ERTC does not count for 1st QTR 2020 (only March 13-31 wages can be used, and that amount is claimed on the 2nd QTR 2020 form). You can claim the credit on the original 941 if not filed (but the 2020 form didn't have the ERTC listed at first. If you can't claim it on your original 941 because the lines don't appear on the form, then fill out the 941 as usual and submit the 941-X with it). For 2021, an update was made to the form, so you can claim the ERTC on the original 941. I have a video demonstrating this as well. studio.th-cam.com/users/videoCqQv3A6x2FE/edit
@@CandyMesser Thank you so much!!! I sure do appreciate your assistance!
@@cindymcnutt3120 You are welcome!
If you have a quarter that has had PPP funds, you use what gross wages that were not paid with PPP. When I fill out the worksheet, step 1 ask to put the full amount to figure out SS tax but later I have qualified wages that were less. So do you multiply the qualified wages x 6.2 to get the correct amount so that you are getting credit on SS that is correct?
You are not getting credit on Social Security. This calculation is only determining what your employer cost of the Social Security tax was on the originally filed return which becomes the non-refundable portion of the credit (the full ERTC calculated on qualified wages only is made up of the non-refundable and refundable portions).
If a qualifying S-corp did not pay owner wages in 1Q or 2Q 2021 (payments made were originally classified as distributions) and you decide to now take the position S-corp owners qualify for the credit (the IRS knows the issue and has had over 6 mos to clarify and they have not), would you amend the Form 941's to claim $10k in owner wages and $7k in ERTC?
I assume in this example no owner owns 51% or more (if anyone does, they do not qualify). But if 50% or less is owned by a person, you can go back and say the owners were paid. However, you will incur penalties for not paying the taxes timely. But this will be less than the ERTC credit you could claim, so it would probably be worth it. You would then have to add additional information I didn't include in my video including increasing wages, Social Security, and Medicare (and maybe federal income tax if you choose to withhold - but you might not want to in order to reduce the penalty) on lines 6, 8, 12 and 15.
@@CandyMesser penalties for not paying timely if wages were earned the last day of the quarter and the ERTC results in a large tax overpayment? I disagree that 51% or more S-Corp owners and their spouses do not qualify.
@Randall If you earned the wages the last day of the quarter, you won't have the penalty for the 2nd quarter if applying the ERTC on the 2nd quarter 941, but you could for the first (hopefully not). If you were taking the credit for the ERTC in the same quarter, it should have been listed on the filed 941. So although the credit is greater than the tax due, the IRS could say you didn't pay on time since you are requesting the credit after the fact. And the reason I say anyone owning 51% or more does not qualify is that according to the document "Guidance on the Employee Retention Credit under section 2301 of the Coronavirus Aid, Relief and Economic Security Act Notice 2021-20, it states, "Section 2301(e) of the CARES Act also provides that rules similar to the rules of section 51(i)(1) of the Code (relating to the work opportunity credit) apply for purposes of the employee retention credit. Section 51(i)(1) provides that wages paid to “related individuals” (within the meaning of section 51(i)(1)) may not be taken into account for determining the credit under section 51(a) of the Code. Accordingly, wages paid to related individuals may not be taken into account for determining qualified wages for the employee retention credit. Similarly, section 2301(h)(1) of the CARES Act provides that an employee will not be included for purposes of computing the employee retention credit for any period that an employer is allowed a work opportunity credit under section 51 with respect to that employee for that period". Under IRC Section 51(i)(1) it states "For an eligible employer that is a corporation, a "related individual" is any person that has any of the above relationships (listed previously in the document) to an individual who directly or indirectly owns more than 50% in value of the corporation's outstanding stock. For an entity other than a corporation, the test is based on such a relationship with an individual who is an owner of more than 50% of the capital and profits interest in the entity. For an estate or trust, the test is based on such a relationship with an individual who is a grantor, beneficiary, or fiduciary of the estate or trust. But a spouse is not listed on the "related individuals" description, so if you own 51% or more, your wife would qualify. If you are 50/50, you should both qualify. The related individuals include:
Child or descendant of a child
Brother, sister, stepbrother, or stepsister
Father or mother or an ancestor of either
Stepfather or stepmother
Niece of Nephew
Aunt or uncle
Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
I hope you find this information helpful.
Where did you get the worksheet? I got one that doesn't have the step 3
It was not easy to find, and it's been updated a few times. Email contact@abandp.com and a staff member can send one to you.
Your example assumes all wages for th quarter are qualified wages for ERC. What if this includes wages paid in excess of $10k for an employee during the quarter?
I thought I had said qualified wages in the video, but I don't recall. I create a spreadsheet to track the wages by employee as many of my clients qualify for multiple quarters. If someone was paid more than $10,000 in the quarter, I create a column to calculate the qualified wages and create an "if function" that says if the wages are greater than $10,000 enter $10,000, otherwise enter the total wages paid to each employee. Then the total of that column is the amount of the qualified wages to use. If we are doing more than one quarter, I also track the wages to see the amount I can use for each employee for subsequent periods. Of course, if there is PPP loan, we must also remove the amount of wages being used for forgiveness in the covered period.
Aren't we required to file (if we normally have to file schedule B) an amended Schedule B as well? And if so, it's my understanding that we are to deduct the amount of the credits from each deposit shown on schedule B until we use it all for that quarter, but for the 2nd Qtr. of 2020, since March12, 2020 - March 31, 2020 is supposed to be added to the 2nd QTR 941 X, do we also deduct those credits from the 2nd Qtr. amended schedule B?
No, you do not amend or file schedule B with the ERTC. Your liabilities and when they occurred did not change (this shows the tax due each time payroll is run and the tax amounts withheld are still the same.) You apply the credits on line 13a of the 941 form (Total deposits for the quarter including overpayment from a prior quarter and overpayments applied from forms 941-X filed in the current quarter). So you will only send in the 941-X and then apply the credits to the current quarter's 941 in which you file the 941-X and any subsequent quarters if the credit is not used on the 1st 941 submitted. To keep it easier to track, you could also continue to pay your taxes each period and receive a refund check in the future. That way you don't have to keep track of how much is used (and in case the IRS determines a different amount for your refund).
@@CandyMesser Thank you. I went back and re-read the directions late yesterday and had pretty much decided that an amended Schedule B was not needed. I appreciate you taking the time to answer my question.
@@stjwtraining5835 You are welcome!
Candy how does the line for March 13th - 31st 2020 calculate in to the whole thing.
The IRS did not allow a 941-X for the first quarter 2020, but they allow you to add wages for March 13-31 on the 2nd quarter 2020 return. You will add qualified wages for this period to line 33a on the 941-X and add this amount to your 2nd quarter qualified wages to determine your ERTC.
I think I heard you say that it is 10k a year in the beginning, and then later it is 10k a quarter.
Yes, 2020 only allows qualified wages up to $10,000 per year, so you must look at each employee's earnings over multiple quarters and stop using them once they've hit the $10,000 total (of course, subtracting wages used towards PPP, if applicable). But for 2021, it is 10,000 per quarter.
Hello- I searched the comments for an answer but cannot find anything. Is there a line that the tax deposits made should be included?
No, you don't list tax deposits. But the non-refundable portion of your calculation determines your Social Security expense as the employer for the quarter (or if filing 3rd or 4th QTR (if a recovery startup business) 2021, you are figuring the Medicare portion.
I have a questions…Which amount will be refunded? The refundable portion amount? On your example which will be the amount you will get check for?
Assuming your calculations are correct, you get the refund on the full ERTC (refundable and non-refundable) plus interest.
In the example in this video, the credit is $35,156 plus interest.
Hi Candy, do you prepare this for others?
Yes, we can assist. If you provide the qualified wages for each period, it's $500 per quarter for us to calculate the figures and complete the 941-X. If you need help determining the qualified wages and want to send us all the info for payroll and PPP (if applicable), we charge $500 for every 5 employees per year (if we're doing both 2020 and 2021). You can reach out to my staff to start the process by calling 310-534-5577 or emailing contact@abandp.com.
Hi, sorry quick question, if we are using line 33a to add in 1stQ qualified wages, where do we calculate the additional employer share taxes? It seems only q2 taxes are represented? Does that make sense what I'm asking?
You aren't calculating employer share of taxes. The only area you put the employer's social security is in section 1 of the worksheet to help determine your credit. You will put March 13-31, 2020 wages on line 33 (and the 2nd quarter 2020 wages on line 30). You will determine your ERTC (refundable and non-refundable) and enter that on the 941-X. Do you have the worksheet to help you determine the figures? If not, reach out to my office at contact@abandp.com and they will send it to you.
@@CandyMesser okay I see so we're calculating credits. So then where do we calculate credits for the first quarter qualified wages?
@@westons3446 For 2020, you can only claim wages for March 13 through March 31 and you will include it on the 2nd quarter 941-X on line 33a. If you qualify for 2021, you will calculate all wages and report on line 30. To calculate the exact credit, use the worksheet. If you need the worksheet, my staff can send to you. Call 310-534-5577 or email contact@abandp.com. We'll be happy to forward it to you.
@@westons3446 You can only count March 13-March 31 2020 wages when calculating the credit, and it is included with the 2nd quarter wages (different line) on the 2nd quarter 2020 941-X.
Why are your qualified wages the same as the original 941? Are you completing this as if you didn't have to reduce wages by PPP loans?
In the example, the client I used had all wages qualified. No owners are on payroll and everyone earned less than the $10,000 max. This client didn't take out a PPP loan, and even if so, the covered period was 24 weeks and they would have had enough wages in the subsequent quarter to qualify for forgiveness.
I have a client who is recovery startup as they started in July 2020. However, I heard that those business would still qualify for Q1 and Q2 year 2021 if they had a decline in gross receipts. Can you confirm if this is correct, and if so what is the percentage decline between the quarters? Also, which worksheet would I used to calculate those credits.
A recovery startup business can qualify for earlier quarters if it had a mandatory shutdown or reduction of services. But the comparison for revenue was usually comparing one quarter in 2021 to the same in 2019. Since recovery startup businesses weren't operating in 2019, the IRS did allow recovery businesses to compare the quarter in question in 2021 to the same in 2020. Since they didn't begin operating until the 3rd QTR of 2020, they don't have earlier quarters to compare to for 2021. I don't believe they can qualify except as a recovery startup business since they don't have the history to compare.
Candy, question does it matter if company is non-profit?
Non, non-profits can also apply.
Hello, thanks again for the info. I am including Q1 2020 March 13-31st qualified wages in the Q2 2020 941x but there is no mention of the corresponding nonrefundable portion of those wages, are they being disregarded or am i missing an entry somewhere??
You don't have to calculate the non-refundable on the March 2020 wages. You are only using the original 2nd QTR wages and figuring the 6.2% of the SS wages to determine the employer's share of the tax. This gives the non-refundable portion of the calculation.
Can we use the 941-X Revision July 2021 for the 2020 941-X ERC credit?
Yes, but you must use the correct worksheet. As of July 2021, the non-refundable portion of the credit is calculated from Medicare Wages and multiplied by 1.45% instead of Social Security Wages by 6/2%. But as long as you use the correct worksheet, you can use the revised 941-X to complete any period.