Businesses, small and large, were affected by the COVID-19 pandemic. Many had to resort to employee layoffs, while others shuttered completely.
The United States government implemented numerous initiatives to aid these businesses, including the Employee Retention Tax Credit. Introduced through the Coronavirus Aid, Relief and Economic Security Act (CARES Act), the refundable payroll tax credit was designed to encourage eligible employers to keep their employees on the payroll, even when they’re not working during the covered period due to the COVID-19 outbreak.
In March 2021, the Employee Retention Credit (ERC) was extended through the enactment of the American Rescue Plan Act (ARPA) to include all of 2021. Qualifying companies still have time to take advantage of the employee retention credit and can claim 2020 expenses until April 15, 2024. Similarly, 2021 expenses can be claimed through April 15, 2025. How? By amending their quarterly tax returns through IRS Form 941-X.
In general, Form 941-X is used by employees to file either an adjusted employment tax return or a claim for a refund or abatement. If your business is eligible for the employee retention credit, navigating the process of amending Form 941-X can be confusing – just as with most tax forms! We’re here to guide you through that process.
Basically, Form 941-X is utilized to make corrections to Form 941. An eligible employer is required to file Form 941-X for each calendar quarter in which they wish to claim the employee retention credit. To complete the form, you’ll need to provide information on your federal income tax withholding, employment taxes, and Medicare taxes. You must submit Form 941-X within three years of the filing deadline for your previously filed Form 941.
By following these 14 steps, you will be able to ensure that your employee retention credit claim through Form 941-X is accurate and approved:
If you are unsure about how to file a Form 941-X amendment for the ERC credit or need assistance preparing and submitting your application, consider working with one of our experienced tax professionals. Here at Stenson Tamaddon, our tax specialists can guide you through the process and answer any questions you may have along the way. That way, you can feel confident about the accuracy and completeness of your amendment.
Get started with us today, so you don’t miss a cent! Also, check out our six tips for claiming the employee retention credit.
Under the CARES Act of 2020, businesses eligible for ERC credits include any employer operating a trade, business, or tax-exempt organization. However, it does not apply to governments or their agencies and instrumentalities.
Your business is eligible for the ERC if it sustained a full or partial suspension of operations limiting commerce, travel, or group meetings due to COVID-19 and orders from an appropriate governmental authority or experienced a significant decline in gross receipts during 2020 or the first three quarters of 2021. If your business qualified in the third or fourth quarters of 2021 as a recovery startup business, it also qualifies for the employee tax credit.
This varies by business, but backlogs at IRS submission processing centers have resulted in some businesses waiting 6-9 months for their ERC refund check. There are more than 800 various IRS tax forms and schedules.
Make sure you’re equipped with the following information:
Once you file the employee retention credit using IRS Form 941-X, you should receive a notice from the IRS within four weeks detailing the status of your refund check. The employee retention credit (ERC) refund typically takes 6-8 weeks to process.
To check on the status of your claim, call the IRS helpline at (800) 829-4933. Have your employer ID number, Social Security number and tax return information readily available.
In general, ERC-qualified employee wages include those paid by qualifying companies to employees because operations were suspended or the business experienced a decline in gross receipts during the COVID-19 pandemic. What’s covered? Cash wages, both hourly and salaried, along with vacation pay and any other taxable wages. Wages under the ERC program also include qualified health plan expenses that are allocable to those wages.
Qualified wages paid under the ERC program are limited to the first $10,000 of compensation paid to any employee during a calendar year (2020) or calendar quarter (2021) and can be claimed for wages paid or incurred from March 13, 2020, through September 30, 2021. If your business employed an average of more than 100 full-time employees (generally 30 hours per week or more) on average per month people in 2019, you’re only able to claim qualifying wages for employees that you retained and paid for not providing services.
The post How To Fill Out 941-X For Employee Retention Credit [Stepwise Guide] first appeared on Stentam.
The post How To Fill Out 941-X For Employee Retention Credit [Stepwise Guide] appeared first on Stentam.
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