What is the plan to handle the Employer Retention Credit part of the CARES act? This is where the employer can get a 50% credit off their payroll taxes, up to 5k per employee for wages paid (including health insurance) for those who have experienced a decrease in revenue. The tax deposits immediately can be reduced by 50% and the 941 has to be adjusted accordingly to show the employer is taking the credit. I know QB already implemented the FFCRA which factors in the sick paid leave credits (up to $5110 per person), but this one is a bit more complicated, because not everyone will be taking it or qualify. For now I plan to calculate my credit after running payroll and reduce my tax payment accordingly, but QB has to find a way to track this and ask every payroll if you want to take the credit and then adjust 941 accordingly!
Here is the IRS link with details: https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act
Thanks for bringing this up, @khani99.
I just wanted to commend you for taking advance steps on personally addressing this concern.
Our Compliance Team is aware of this new act imposed by your government last March 27, 2020. They are now working on hand to update our system so you'll be able to track this new law in QuickBooks.
We'll be also sending you an email update once they are available. For now, it would be best to track your tax credit manually using an Excel file. You can later transfer this data file once our developers finish this update.
I've also added an article about the Families First Coronavirus Response Act and how you can apply it in QuickBooks. This act provides support to individuals and small businesses affected by COVID-19. Just follow the steps provided in this article to pay your employees under this act: Pay employees under the Family First Coronavirus Response Act.
If you have further questions or concerns, feel free to reach back to our Community site. We're always ready to provide you assistance. Stay safe.
I am disappointed there hasn't been much talk about this particular credit, either in the media or from QuickBooks. I am not a QuickBooks expert, but here is how I am handling the Employee Retention Credit in qb until further guidance comes out.
First, I am maintaining a spreadsheet to account for each employee's wages and health care costs. It is unclear to me whether the $10k limit per employee is $10k max per each individual or if we have 10 employees if the total is $100k in all even if an employee earns over 10k while another earns under. For now I am assuming $10k max per individual. If anyone has clarification on this for me, I'd appreciate it!
I am a semi-weekly depositor for 941. On my spreadsheet, I have a column for each payroll date and a row for each employee. This will help me keep track of totals by individual employee. At the bottom of the sheet, I am recording the totals for my 941 categories - Federal Withholding, SS Company, SS Employee, MC Company, and MC Employee.
In my Chart of Accounts in QuickBooks, I created a new account called "COVID-19 ERC Liabilities" of type "Other Current Liability".
After determining how much of a credit to take against the 941 liabilities, I go to "Pay Liabilities" in QuickBooks and select the 941 to view/pay. Down in the bottom half of the dialog there is a tab labeled "Expenses". Switch to that tab. Under Account, type in the "COVID-19 ERC Liabilities" and then enter in a negative amount for the credit you want to take against your 941 deposit.
If there is tax liability still due, process as normal (eg, e-payment or check). If it is a $0 payment, I switched it to "Check" because I don't know what will happen if I try to push through a $0 payment with e-file.
This is what I came up with after a couple hours of poking around. I looked at doing an Adjust Payroll Liabilities but I didn't like the way it accounted for company and employee items separately against my accounts. It didn't seem to mess up my 941 and Schedule B, but I also don't like the interface for the adjusted payroll liabilities. I think doing it with the expense "credit" as above is the cleanest and most easily tracked way. That and my spreadsheet.
Would love to hear any feedback and suggestions or gotchas I missed...
This is helpful, thank you for posting. I am using an excel spreadsheet until we get further clarification from QB, but may try your example if nothing is sent for us from them. My understanding is that we can do these credit calculations on wages starting after 3/13/20. Is that everyone else's understanding or am I misinformed? Also, we can take these credits on our employees whether they are working and being paid or not, if we have have fewer than 100 employees?
The credits calculation will take effect on the 1st of April 2020, brenrobtew.
If you have fewer than 500 employees, you'll have to access to three new provisions. Thus, if you have fewer than 50 employees, you may be able to get a waiver exempting your business from these new requirements.
I've also added these links that have more detailed information about the new Response Act:
Just tag my name in case you have other concerns. Thank you and stay safe!
I think you are confusing question and this thread with the CARES act provision dealing with the sick and paid family leave time. That is already active in QB as of 4/1/20 and working well and I have already used it (this is where you can create a COVID pay type) and pay someone under that category and get up to $5110 of the wages reimbursed as an immediate payroll tax credit.....but my question was totally different and about the ERC (employee retention credit.) which is also part of the CARES act for those with under 100 employees and gives a 50% of wages paid (up to 10k in wages) as a payroll tax credit.
here is the info about the program i was talking about:
I agree. No one seems to know about this. (even QB support!) b/c they keep answering the question with info about the sick paid leave provision. Maybe b/c it is only for under 100 employee companies and the PPP has dwarfed the news. Also for this provision you have to have a decrease in revenue by 50% quarter to quarter compared to 2019, although I'm not sure how the IRS would be checking this as you simply enter a credit on your 941 form when you submit it in July for Q2. (the link to the IRS website i gave in my question is very useful and shows examples).
You can NOT use this ERC if you are using the PPP so be aware of that. The PPP is a better deal b/c you can get 100% of your wages refunded over the 8 weeks after getting the money, but you have to find a bank, file an application, hopefully get approved and then get a the loan, and then meet the requirements to get that loan forgiven. (ie show the loan money was spent on wages, rent, utilities) AND that you retained 75% of your staff.
To answer your question about the 10k. Yes it is 10k per person, so if one employee earns only 5k in this time then they will get a $2500 credit and if another earns 20k, they will only get a 5k credit b/c the max credit issued per employee is 5k. The good thing is it applies to payroll till the end of the year, so assuming your employees earn more than about 20k per year, you should have paid them 10k in wages by the end of the year. You are also supposed to only do this until your quarterly revenues are back up to 80% of what they normally are per quarter, so depending on your business and what happens you may only have a few months to use this, so plan your payroll accordingly.
Your idea seems sound and should work. For now, what I did is just keep a spreadsheet as you said and didn't do anything in QB b/c i am planning to send any payroll tax payments until I've exhausted the credit. For a rough example, this payroll I just ran was 26k in wages, so I'm expecting a 13k credit and my payroll taxes due (semi weekly deposit) came out to 6k, so I simply didn't send anything (QB is emailing me every day that my payroll tax is overdue!).
Of course next payroll would be different as some employees have nearly used up their 5k credit and others haven't, but i'll track each payroll cycle on spreadsheet and then once I finally owe payroll tax I'll have to figure out a way to modify what QB wants me to send. As the one advisor said, maybe call them and adjust the payment manually somehow. Hopefully, by then they would have incorporated some kind of system where you can enter qualified wages (b/c you can add employer health premiums) and then QB will know to give a 50% credit.
Of course (this part I read on IRS) you will have to put in the amount of your credit on your next 941 you file in July so the IRS knows why you shorted them. And if you have leftover credit you can push it to Q3 or ask for a refund check. (I would push it forward to avoid confusion). So I imagine the 941 form will change before then?
Very confusing indeed.
correct. these wages must have been paid from 3/13 thru the end of 2020. i think you actually have to pay your employee the wages. they may not be working but as long as you are still paying them then you can take the credit. the idea behind the retention credit is you can still retain your employees and it will only cost you 1/2 their normal wages and save the government from having to pay them unemployment (which they typically give 50% pay) so cost to the government is the same and you get full labor for 1/2 price...of course it is only up to 10k in wages, but even at $25/hr that's 10 weeks, so it's a decent amount of time for hopefully things to turn around. Now if your employees are literally doing 0 work any by definition to use this program if your revenue is down 50% then it may not make sense to pay them via this program b/c it will still cost you 50%. You may choose to furlough some completely and retain some. Very difficult times and decisions most of us have never had to make.
You can do these on wages since 3/13-3/31 assuming you meet the requirements for Q1 2020 vs Q1 2019. That is, either your YoY receipts are less than 50% or you were forced to close due to a health/safety order. And yes if you have fewer than 100 employees it is on all wages.
Look for info on IRS Form 7200. That's the best place I've found the rules and regs spelled out for this. It is also the form you would use to claim credits above and beyond what you may withhold from your employment taxes.
I'm running a payroll today, and I appreciate the advice on creating an "Other Liability" Account.
Yes, this is applicable to any hours as of March 13th, I've gotten confirmation on that from several sources.
Even though the two credits are different. The article and directions for the FFCR Act credits are helpful, I would recommend reviewing that article for overall content, keeping in mind specifics will be a bit different.
Hi, you said: (QB is emailing me every day that my payroll tax is overdue!).
I feel your pain. I created the Other Current Liability account called Covid 19 Credit and made that Federal Tax Deposit using the "Epenses" tab to record a negative amount to that newly created Other Liability. That, at least, makes QB think a payment was made. I used a check type instead of E-payment.
I hope that helps.
Is this Credit Available to S-Corp 100% shareholder - i.e. An s Corp owner/officer/employee plan to $80,000 in salary in 2019 - Can we then take $5,000 credit ?
Any help is appreciated
I found this info on IRS website. You don't have to have a 50% reduction in receipts.
1. The credit is available to all employers regardless of size including tax exempt organizations. There are only two exceptions: (1) state and local governments and their instrumentalities and (2) small businesses who take Small Business Loans
2. To qualify, the employer has to meet one of two alternative tests. The tests are calculated each calendar quarter – Either the employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter [The operation of a trade or business may be partially suspended if an appropriate governmental authority imposes restrictions upon the business operations by limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19 such that the operation can still continue to operate but not at its normal capacity.] OR the employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019 they no longer qualify after the end of that quarter.
I spend a lot of time in online chat and two different phone calls with Intuit Assisted Payroll last Thursday/Friday to realize they actually didn't know about this OR how they are going to handle it. There is also a Payroll Tax Credit which allows employers to defer the employer portion of the Social Security Tax from April 2020 until December 2020. They will have until 12/31/21 to pay 1/2 of the deferment and until 12/31/22 to pay the remaining 1/2. Intuit doesn't know how to do this yet either.
Since we pay for Assisted Payroll and Intuit files our QTRly payroll tax returns, I don't really have control over this but how do I inform Intuit they we want to take advantage of these two programs? (we are a 501(c)6 so we don't qualify for PPP, unfortunately)
the IRS posted some new guidance as an updated FAQ on this topic. I think mostly what we've already discussed but it is spelled out more clearly and a lot more helpful details. For example, they say (as we suspected), the Q2 941 form will be revised by IRS before end of june so we can reflect these credits. And it was obvious, but the law for some reason didn't say this, that the credit is against all payroll taxes (ie all taxes you withhold from employee), not just FICA (which is what was stated in the law). And there are some other points, so worth a read.
Hopefully QB will sort it out eventually, but they have a few months at least. In the meantime, we can keep a spreadsheet or a separate liability account as has been suggested by others here, and then reconcile everything it before filing the 941 and make sure we submit payment, if any is due, at that time.
You can even defer 50% of your FICA payments as well until 2021 or 2022 in combination with this ERC program; that get's very confusing in my opinion, but it can be done.
I use the online intuit payroll system and was set up for electronic weekly deposits. My estimated Employee Retention Credits will exceed my 941 deposits.
1) I'm going to file form 7200 requesting an advance.
2) I'm going to change intuit 941 schedule from WEEKLY deposit to QUARTERLY deposit.
Hopefully, Intuit will have the 941 form ready to accept the credit calculation by then. According to the IRS that is where we will be able to enter the credits, advances, etc.
Hello, Wesmon. The Community will be here to help you through these times and answer any questions you have.
Our engineers are currently working to keep all features in QuickBooks, including forms, up-to-date with all of the changes taking place. Soon, you'll be able to calculate credit appropriately on Form 941. We thank you for your patience as we work to support you and your business.
Here's a resource from the US Department of Treasury about the Employee Retention Credit which you may find useful: What You Need to Know About the ERC
If you have any questions, you can reach out to me anytime. Have a wonderful day!
Wow, ZackE. Instead of answering my question, you CHANGED your previous answer since I pointed out it was confusing different relief programs? I pay for Assisted Payroll so I have no control over completing the 941. Please contact me to tell me how Intuit is going to handle this. You have deducted employer taxes for 4/01 - 4/15/20 that should be PUT BACK into my account as soon as possible.
Hello there @KelleyC.
You'll need to ensure that your QuickBooks payroll has complied with the Family First Coronavirus Response Act before you run a regular payroll.
As per the Act, if an employee was impacted and took time off for COVID-19 related issues before April 1, 2020, the time would be tracked as regular sick hours and is not eligible for any tax credits at this time.
Here's how to add a pay item:
You can read through this article for more detailed steps: Pay employees under the Family First Coronavirus Response Act
Please let me know how it goes or if you have any other questions or concerns. I want to make sure everything is taken care of for you. Have a good one!
Doesn't any Intuit employee read the original question, or the regulations? We are asking about "Employer Retention Credit" which has nothing to do with sick leave!
I've been posting and calling tech support and no one at Intuit knows about the Employer Retention Credit.
Employers can take a credit of 50% of wages off on the 941 or get an advance on form 7200
same here. i don't plan on doing the 7200 thing b/c eventually after a few more payrolls the credit will be used and i dont want to hassle with that form and getting a refund. you have to run your own numbers and see what your future payrolls look like and credits but if it's only a matter of a few weeks till you use that credit that 7200 form may be more hassle than it's worth. (IMHO)
i like the idea of changing setting to quarterly depositor. that's brilliant and should turn off the QB alarms (not that you can't simply ignore it) but it's a good idea nonetheless.
yeah i'm not sure why the periodically keep defaulting back to this shpeel about the cares sick relief act, like no one is talking about that. and then they say that, even after talking about the 50% credit in a prior post and that the engineers are working on it.
i will give QB credit that on 4/1 the sick relief thing was active b/c i had to enter it for an employee and they even had a link/notice right on the payroll page with instructions. it was very easy to enter the new covid payroll type and when i entered their sick hours there it instantly gave me a credit for that time on the payroll taxes 941 payment so that was great (but not related to this thread of course!)
well ZackE did say (and even gave a link to the IRS site about ERC - which i posted in my original question) that they are working on it and will adjust the 941 at some point. remember it's not really in issue until july when that 941 is due so i'm sure it will be resolved by then. the only thing is to not make your payments, assuming you have enough credit to offset what you owe, or adjust your payment accordingly. even if you owe, you can still opt not to pay if you expect to be getting future credits. i use online payroll plus so have to initiate my payments, but based on some other comments, apparently those using full payroll, the money gets sent automatically, so that is a real issue and i sympathize with them b/c QB hasn't figured it out yet. they will need to incorporate some kind of questionnaire in the payroll tax section or way to enter our credits so we can adjust the payroll tax due and reflect the credit we are claiming on the 941.
Again, you are confusing the issues. We are PAYING our employees full pay. They are not taking time off. We are not paying them sick or paid family leave. BUT our association is not functioning at full capacity and have had many meetings and travel cancelled. We should be receiving the 50% credit up to $10,000 of wages but we use Assisted Payroll so I don't have control over it! I will be calling Assisted Payroll Support today to attempt to get this handled.