2023 Information about the Employee Retention Credit (ERC)

What you need to know about the Employee Retention Credit in 2023.

You may have heard of the Employment Retention Credit (ERC), which was introduced to assist businesses during the pandemic back in 2020. The ERC was created as part of the CARES Act. 

Employers were able to claim this credit throughout the pandemic. Although it is no longer available, employers can still claim it for previous quarters when the credit was available. 

As time goes by, it has become a common question of how long employers will be able to claim credits retroactively. 

Here is the latest information from the IRS on when this credit expires and what employers need to know about it in 2023. 

What is the Employee Retention Credit (ERC)

Here is a quick overview of what the ERC is and why employers would have claimed it during the pandemic. 

The employee retention credit provides relief for businesses that kept their employees on the payroll during the tumultuous economic conditions of the pandemic. This refundable credit could be claimed for 50% of up to $10,000 in wages paid by businesses that were financially impacted. 

The employee retention credit was available to claim from march 12, 2020, until January 1, 2022. In the third and fourth quarters of 2021, this credit only applied to recovery startup businesses. 

How do Employers claim the Employee Retention Credit?

Employers have been able to claim this credit when they file their quarterly payroll tax return, Form 941 2023. New lines were added to the form for employers to provide this information and Worksheets were added to help employers calculate this credit. Form 941 has continued to be updated as the credit was phased out. 

In 2020, the IRS released a new form, Form 7200 for employers to request advance credits. However, as the credit is no longer available, Form 7200 is also no longer available. 

When claiming the ERC retroactively, employers must file Form 941-X, Adjusted Employer’s QUARTERLY Federal Tax Return, or Claim for Refund. Form 941-X is typically used to correct certain errors on a previously filed Form 941 and claim refunds for overreported amounts. 

Will there be a deadline for employers to claim the ERC?

Yes, while employers are still able to claim the ERC on applicable employee wages between March 12, 2020, and January 1, 2021, this will not be the case forever. 

This means businesses that think they may be eligible for the employee retention credit, must apply sooner rather than later. 

For the 2020 tax year, the deadline for the ERC is April 15, 2024. This deadline applies to all 941 filings in the second, third, and fourth quarters of 2020. 

For the 2021 tax year, the deadline is April 15, 2025. This deadline applies to all four quarters because the ERC was available for all four quarters of 2021. 

What Should I Do If I’m Expecting an ERC Refund?

This has been a common question for many employers in recent months. If you are expecting a refund or need to know the status of your refund, it is best to contact the IRS directly. The IRS alone can advise you when it comes to this information. They can be reached at this number: (800)829-4933. 

Filing Payroll Forms 941 and 941-X

Does your business need a simple solution for filing payroll tax forms with the IRS? TaxBandits is here to help! Our application supports the easy filing of quarterly Form 941, 941-PR, and 941-SS. We also support 941 Schedule R for aggregate filers. 

TaxBandits offers a simple e-filing process with built-in tax calculations, error checks using the IRS Business Rules, and Schedule B for semi-weekly depositors. Need to file Form 941-X to amend a previously filed Form 941-X? With TaxBandits you can easily complete and print the form in minutes, then mail it to the IRS. 

Ready to get started with TaxBandits? Create a free account to start filing. 

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