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knox
Level 1

Employer Retention Credit

It's the end of the quarter and have determined eligible for the Employer Retention Credit for the 2nd quarter.  How do we make a retroactive payroll adjustment to reflect that the wages are eligible for the credit and properly reflected on the 941?

10 Comments
Jovychris_A
QuickBooks Team

Employer Retention Credit

Hi @nox.

 

Once you've determined you are eligibility to accept the credit, make sure to set up your payroll first to acquire and track the credit.

 

The CARES Act's Employee Retention Tax Credit covers regular time, overtime, and company contributions to health care. You’ll need to set each of these items in your payroll, and then run payroll.

 

Depending on your payroll service, you can refer to this article for more details on how to set it up properly and reflect it on the 941: How to set up and track the Employee Retention Credit under the Cares Act.

 

Please feel free to leave a message if you need further assistance. I'll keep my notifications open. Stay safe and well!

knox
Level 1

Employer Retention Credit

I understand how to set it up and run payrolls going forward.  The issue is that eligibility if often determined at the end of the quarter in which the payrolls you have already run will qualify.  How do you make a retroactive adjustment so the wages are properly reported on the 941.

ReymondO
QuickBooks Team

Employer Retention Credit

Hi there, @knox.

 

It seems that this thread wasn't tagged as QuickBooks Desktop (QBDT) or QuickBooks Online (QBO). However, I can still provide you the steps on how to apply the retention credit to the payroll that you've already created.

If you're using QBDT, we can still go back to paycheck and edit it. All you need to do is to zero out the amount in the Earnings section and use the CARES Retention Credit item that you've created under Other Payroll Items.

 

Then, enter the hourly rate in the RATE column and hours worked in the Quantity column. You can check out the screenshot below as your guide:

 

 

 

However, if the tax payment has already been made, you can delete and recreate it so you can apply the CARES Retention Credit.

 

Also, I recommend reaching out to IRS if you want to ask for a refund. Aside from that, you'll have the option to apply this payment to the next period. You can use this article as a guide: Enter historical tax payments in Desktop payroll.

 

If you're using QBO, you'll need to delete the paycheck and recreate it so you can apply the retention credit.

However, if the tax has already been paid, you can follow these steps to apply it to the next period: Resolving a tax overpayment

 

You can also run a Payroll Summary report to view of your payroll totals, including employee taxes and contributions

 

I'm always here to help if you have any other concerns or questions. Just tag my name in the comment section and I'll get back to you as soon as I can.

knox
Level 1

Employer Retention Credit

@ReymondO Thanks for the info.  I am using QB Online.  I really feel like there should be better solution, it would be nice if you could do an adjustment run using positive and negative hours.  Just a thought.

ka95
Level 1

Employer Retention Credit

We too decided at end of 2nd quarter to take the ERC. We use QDT. I followed the steps to update past paychecks as in your screenshot above.  I then applied the credit to my final monthly payment for the quarter, and I am satisfied with the data on my 941 -- it reflects what I thought it should. 

 

My concern is on my profit/loss statement and my balance sheet.  The credit is not reflected on either of these.  I see the Cares Retention Credit (for the amount I manually entered on my 941 payment) in my Payroll Details Report, but not on my profit/loss statement.  What am I missing or not understanding?  I would assume my Payroll Expense line-item would be reduced by the amount of the credit we took...  

 

Thanks for any help or clarity you can provide!

ka95
Level 1

Employer Retention Credit

We use QBDT.  We too decided to take the ERC at the end of 2nd quarter.  I have updated all past paychecks (as per your screenshot).  I then manually applied the CARES Retention Credit to our final monthly 941 payment for the quarter.  And our 941 looks good - the calculations are as I anticipated they would be. 

 

My concern is with my balance sheet and profit/loss statement.  The CARES Retention Credit is not reflected on either of these.  I see the amount I took on our final payment on my Payroll Details Report, but not on my profit/loss statement.  I would assume it would be among my Payroll Expenses - decreasing my Payroll expenses by the amount of the credit we took on the final payment - but it is not.  What am I missing or not understanding?   

 

Thank you! 

Angelyn_T
QuickBooks Team

Employer Retention Credit

Thank you for joining the thread, @ka95.

 

Let's make sure that the payroll item was properly set up so it'll show up on your report accordingly. 

 

First, set up your expense accounts for the retention credit, then create your payroll items and select the expense account created previously. To set up your expense accounts:

 

  1. Open your QuickBooks Desktop, then go to the Lists menu.
  2. Click on Chart of Accounts to create a new account.
  3. Select New from the Account's drop-down.
  4. Choose Expense, then select Continue.
  5. From the Other Account Type drop-down, select Other Expense.
  6. Give your expense account a name, such as CARES Expense, in the Name field, fill out all the relevant information, and select Save and Close.

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Then, create your item/s. For the detailed instructions, open this article and follow the steps under QuickBooks Desktop Payroll: How to set up and track the Employee Retention Credit under the CARES Act.

 

Once completed, use the item when running payroll to post the payroll expenses and liabilities on your report precisely.

 

If there's anything else I can do for you, please don't hesitate to leave a comment below. I'll get back here as soon as I can to help you again. Keep safe!

ka95
Level 1

Employer Retention Credit

I have checked and double-checked everything precisely on the set-up list provided.  Is there anyone on QB staff that has more experience on this particular subject?  Everyone keep referring me to the "How to Set Up and Track..." page -- both online and in phone support.  I would really like to hear from someone that has more knowledge on this subject please.  

foster2015
Level 2

Employer Retention Credit

Do you put all of the wages for the pay period into the Cares Retention Emp item under preview paycheck for desktop or just 50% of the wages?   Trying to figure this out for 2021 since we did not qualify in 2020, but now we do.  Long story, but trying to do this for January 2021 payroll.

Angelyn_T
QuickBooks Team

Employer Retention Credit

I appreciate you for joining the thread, @foster2015.

 

I can share with you some insights about how to enter employer retention credit on paychecks.

 

Yes, you can enter the full credit amount. Under the Earnings section, remove the amount listed under Rate, then go to the Other Payroll Items. From there, select the CARES Retention Credit -Emp (or the name used during setup). Then, enter the employee's hours rate and quantity of hours.

 

In the Employee Summary section, you should see the wages (salary or hourly) set to 0, with wages listed under the name entered for the credit during setup.

 

For additional resources about handling Employer Retention Credit, I recommend checking out this link and review the steps under Run a regular payrollHow to set up and track the Employee Retention Credit under the CARES Act.

 

You can also open the topics from our help articles for resources when working with QuickBooks or payroll in the future: Find QuickBooks help articles, Community discussions with other QuickBooks users, video tutorials, a....

 

Let me know how else I can help you with the employer retention credit or payroll by adding a comment below. I'm just a few clicks away to help. Have a good one!

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