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SwitchcorInc
Level 1

CARES Act Employee Retention Credit for Past Payrolls

Hello Community,

 

Does anyone know how to claim and apply the CARES Act Employee retention credit, for past payrolls that have already been run?  If you fall into all of the qualification rules, the effective dates for which you can claim a credit are from March 12th to Jan 1st, 2021.  You cannot combine this with PPP loans, so I am waiting on the outcome of my PPP loan application.  If I do not get the PPP, and want to instead apply the retention credit.  This means I will be eligible to apply a credit for past payrolls dating back to March 12th.  So how do I apply past credits for past payrolls, on future payroll runs?

 

I am using Intuit Online Payroll (though Bank of America).  They have a mechanism set up so that you can claim the credit, but only by inputting hours in the credit paycode for the current payroll you are running.  So if you are about to pay someone $1,200, it will calculate a credit of $600 for that current payroll.  But I need to apply a credit for past payrolls runs.  I cannot figure out how to do this, and I have been on and off with intuit support the past two days with no resolution.

 

Can anyone help?  Thank you!

3 Comments
Steve_C
QuickBooks Team

CARES Act Employee Retention Credit for Past Payrolls

Hi SwitchcorInc.There currently isn't a feature for Intuit Online Payroll to do this but, for past payrolls, you would need to look into form 7200 with the IRS. We also have information available to our customers here about the CARES act.

 

Also, just in case you need help getting setup with the PPP loan we have a what is the Paycheck Protection Program page that would be a great help to you. If you need anything else, just leave a reply below. 

SwitchcorInc
Level 1

CARES Act Employee Retention Credit for Past Payrolls

Thanks for the response.  Unfortunately I don't think that is going to be a viable solution.  According to the legislation, you are able to claim credits back to March 12th, meaning credits against past payrolls (before your payroll solution to account for the credit was even put in place).  You should be able to add Q1 credits into your Q2 filing somehow.  Also, you can calculate any credit amount (even against past qualifying wages already paid) as long as it falls in the same quarter.  For example, I should be able calculate credits for April payroll, but reduce my tax obligation in May for that April amount (because its still in Q2).  Your tool only allows you to modify current payroll numbers, but not add in credits for past payrolls without paying those wages. 

 

For example, in April I paid 2,000 in wages but didn't apply the credit at the time.  I qualified for 1,000 in credits for April.  In May, I will pay another 2,000 in wages, and qualify for another 1,000 in credits.  So I have accumulated 2,000 in credits.  Since I didn't apply April credits yet, on my May payroll i want to apply the accumulated 2,000 credit.  Your tool only allows me to account for the current payroll of 2,000 wages, and 1,000 in credits.  

 

In the FAQ you provided, this is referenced in the below question.  The issue I face, is that I don't see how intuit technically allows you to reduce your tax amount for past qualifying wages.  You should provide your customers a way to follow the legislation.  Form 7200 is for claiming an advance on the credit, for example if your credit amount is higher than your obligation amount you can file to roll over the credit owed.  This isn't really related to my question. 

 

Can an Eligible Employer paying qualified wages fund its payment of qualified wages before receiving the credits by reducing its federal employment tax deposits?

 

Yes. An Eligible Employer may fund the qualified wages by accessing federal employment taxes, including those that the Eligible Employer already withheld, that are set aside for deposit with the IRS, for other wage payments made during the same quarter as the qualified wages.

 

That is, an Eligible Employer that pays qualified wages to its employees in a calendar quarter before it is required to deposit federal employment taxes with the IRS for that quarter may reduce the amount of federal employment taxes it deposits for that quarter by half of the amount of the qualified wages paid in that calendar quarter.  The Eligible Employer must account for the reduction in deposits on the Form 941, Employer's Quarterly Federal Tax Return, for the quarter.

 

Example:  An Eligible Employer paid $10,000 in qualified wages (including qualified health plan expenses) and is therefore entitled to a $5,000 credit, and is otherwise required to deposit $8,000 in federal employment taxes, including taxes withheld from all of its employees, for wage payments made during the same quarter as the $10,000 in qualified wages.  The Eligible Employer has no paid sick or family leave credits under the FFCRA.  The Eligible Employer may keep up to $5,000 of the $8,000 of taxes the Eligible Employer was going to deposit, and it will not owe a penalty for keeping the $5,000.  The Eligible Employer is required to deposit only the remaining $3,000 on its required deposit date. The Eligible Employer will later account for the $5,000 it retained when it files Form 941, Employer's Quarterly Federal Tax Return, for the quarter.

Steve_C
QuickBooks Team

CARES Act Employee Retention Credit for Past Payrolls

Hi SwitchcorInc. Since the payrolls were already ran, if you decide to go that route you would need to delete the checks and then run the payrolls again as paper checks with the new tax deferment options applied.

 

Depending on which Intuit payroll product you are using the process may be a bit different. So here's our article on deleting or voiding paychecks. If you need anything else, just leave a reply.

 

 

 

 

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