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Level 3

Applying the 2020 Employee Retention Credit retroactively

With the passing of the CAA on Dec. 27, the Employee Retention Credit is now available to those who received a PPP Loan, if they qualify. The IRS has not updated their website yet. The instructions are to "check back regularly." Has anyone figured out how we can take the eligible ERC for prior quarters in 2020? Do we need to correct paychecks, and amend the 941 for the specific quarters, or is there a way to take all of the allowed credit via the 4th quarter 941? I have not filed 941s yet for a number of clients, but I am quickly running out of time. 

3 Comments 3
QuickBooks Team

Applying the 2020 Employee Retention Credit retroactively

Hi there, Hilary9.


I'd still suggest visiting the IRS website from time to time. The Employee Retention Credit is a refundable tax credit for employers equal to 50 percent of qualified wages that Eligible Employers pay their employees. This applies to qualified wages paid after March 12, 2020, and before January 1, 2021. 


I highly suggest contacting our Payroll Support team for further guidance about correcting paychecks for the prior quarter. Refer to this article for the detailed steps on how to reach them: Contact Support.


I'll add these articles for your reference:


Let me know if you have other questions. Take care!

Level 1

Applying the 2020 Employee Retention Credit retroactively

Since QB's desktop is not updated, here's a work around.  Be sure all Retention Credit payroll items have been added and be sure each employee has the Retention Credit in their payroll file.


From there, add a paycheck for each employee dated 12/31/20.  Remove everything in the Earnings section.  Put a penny in the Retention Credit under the Other Payroll Items section. Make sure the Employee Summary section has 1 penny and nothing else.  Save & Close.


NOW, when you create the 941, you CAN edit the page 3 and the worksheet. 

 There will of course be an additional penny in each employees file and therefore the page 1 & w2's will also have an additional penny.  In my case, the few cents makes NO difference in any other numbers.


Hope this helps.




Level 1

Applying the 2020 Employee Retention Credit retroactively

Hi, I hope this helps others out there who use QB Payroll Online.  I just completed a 90 minute chat session with QB Payroll support regarding retroactive application for ERC. The result was not ideal.

I am assuming you know that any company who received a PPP loan in 2020 or 2021 is now eligible to also apply for ERC.  Do this if you qualify under the guidelines.  It is a significant amount of money.

QB Payroll users need to know the following regarding this situation:

- If you wish QB Payroll to file amended 941-X forms for any quarter in 2020, they will ask you to manually create a spreadsheet that contains an extreme amount of unnecessary data as it relates to claiming ERC. (see attached) This data is paycheck by paycheck, employee by employee, when all that is needed to claim the ERC is aggregate dollar amounts.  This is so they can put all this data into a program that creates the 941-X automatically.  If you have multiple employees, compiling this data will take hours.

- However if you have taken a PPP loan, there is no way to account for this in the spreadsheet, and that is a somewhat complicated thing to do.

- Therefore the 941-X that QB Payroll creates will be incorrect, as the payroll you used to claim forgiveness for the PPP loan will not have been taken into account. 

- There is no way to communicate with the corrections team proactively to get them to take the PPP loan into account

- Claiming this credit on a 941-X is relatively straightforward, and all the data they are requesting is completely unnecessary to create the form, yet they will not do so unless you send them this unnecessary data, and even if you send it, the resulting amended form will be incorrect.

- Therefore, it appears that you (we) need to create and submit these amended form ourselves, with the help of our accountant/CPA

- Going forward, if you go through the significant effort of setting up QB payroll to track ERC in 2021, and if you received a round 2 PPP loan, the system will NOT take that PPP round 2 loan into account when applying payroll amounts to ERC.  Therefore, the 941's that will be generated in April and July of this year will, again, be incorrect with respect to claiming an ERC credit.  See above, as you will need to send in amended forms manually

- Bottom line is that the QB Payroll system cannot account for the effect that PPP loans have on the claiming of ERC, either retroactively or going forward.  If you have received a PPP loan, and set up QB payroll to calculate ERC, the 941’s will be wrong.  There is no expertise at QB Payroll that is working on a streamlined way for the service to handle this.  You will therefore have to most likely file for this SIGNIFICANT benefit on you own, with the help of your CPA.

I hope this helps.  Thank you

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