The ERTC is a fully refundable payroll tax credit for employers that was created as part of the original CARES Act in March 2020.

In December 2020, the Consolidated Appropriations Act expanded the ERTC, allowing PPP recipients to benefit from the ERTC retroactively.

Yes.

When the original CARES Act was passed in March of 2020, employers could choose to apply for PPP or claim ERTC credits, but not both.

Many U.S. businesses opted to apply for PPP aid due to a simpler application process than the ERTC.

In March 2021, The American Rescue Plan Act was passed and it allowed PPP borrowers to claim both PPP and ERTC.

Employers qualify if they:

• Experienced a 20% or more decline in comparable quarters from  2019 to 2021 or year to year. OR 50% decline from 2019 to 2020.

OR

• Experienced a full or partial government mandated shutdown that hindered operations.

ERTC tax credits are claimed by asserting to the IRS that you can legally offset the amount of federal employment tax that you owe the U.S. government by a dollar-for-dollar amount equal to the credits.

ERTC credits are claimed by amending your Form 941 Employer Quarterly Tax Filing using the form 941-X.

The Consolidated Appropriations Act of 2021 allows U.S. employers who qualify, including PPP recipients, to claim a credit up to $7,000 per employee, per quarter during 2021

Paycheck Protection Program: The PPP is a forgivable loan employers apply for through an approved lender to help cover payroll costs (wages up to $100,000, employee benefits, and state and local taxes). Employers can also use some of the funds (40%) to cover interest on mortgages, rent, utilities, operations expenditures, covered property damage, supplier costs, and worker protection expenditures.

Employee Retention Tax Credit: The ERTC is a fully refundable payroll tax credit that employers claim on their federal employment tax return to help cover employee wages and qualified health plan expenses associated with those wages.

Much like the PPP loan forgiveness, ERTC credits do not need to be repaid.

Here are some impacts to consider that qualify your business for the Employee Retention Credit, that happened as a result of Federal/State/Local government mandates that applied to your business in a more than nominal way:

• Full shutdowns
• Partial shutdowns
• Interrupted operations
• Limited capacity to operate
• Reduction in services or goods offered to your customers
• Cut down in your hours of operation

Bankers were helpful with processing PPP loans because they were being compensated fees by the U.S. government to assist employers.

Compared to the ERTC, the PPP program was also a rather simple calculation. 2 ½ times your average monthly payroll including health insurance and state unemployment taxes.

From the conversations we’ve had with bankers, they have no interest in involving themselves in your employment tax compliance. For them it is beyond their scope of services.

Chances are that your tax accountant specializes in Federal and State Income Tax Returns. Their focus is on helping their clients navigate the income tax code and most of them can not become experts in the ERTC program as well.   

Bookkeepers should have access to all the information you need to file an accurate ERTC claim but…

Do they have the time is the question:

• Have they spent the time to research the American Rescue Plan Act of 2021, CARES Act, Families First Act, Payroll & Healthcare Enhancement Act, PPP Payroll Flexibility Act and the  Consolidated Appropriations Act?
•  Have they spent the time to read through and understand the hundreds of IRS Interpretations, codes, and FAQs as it relates to the ERTC and PPP?
• Studied The Small Business Administrations manual on PPP loans and forgiveness and how that relates to optimizing ERTC credits.
• Do they have the time to create the calculators necessary to determine eligibility and maximize the amount of credits their clients can make?
• Lastly, Do they have the time to ensure the accuracy of eligibility and compensation and create the supporting documentation to support an IRS audit of employers taxes should one occur.

Thus far, we have not come across a bookkeeper willing and interested in taking this on.  Please let us know if you do.

3/20/2025 UPDATE: The IRS announced on March 20th, 2025, that businesses are no longer required to amend their 2020/2021 tax returns to reflect the ERTC, and instead you can simply include the ERTC amount as gross income on your income tax return for the tax year when you received it. Please be sure to coordinate with your accountant on doing this properly (this IRS update can be found here in Q2 – https://www.irs.gov/coronavirus/frequently-asked-questions-about-the-employee-retention-credit#incometax).

PREVIOUSLY: Yes, you will need to refile your income tax returns. The IRS has indicated your company’s wage expense (deduction) on their income tax return must be reduced by the amount of the ERTC for the applicable tax year (2020 or 2021). You will need to file an amended federal and state income tax return for the taxable year of the credit to correct any overstated wage deduction.

Note: Any interest paid to you by the IRS would have to be reported on your income tax filing.