HOw do I record an ERC credit?

Thanks!  Worked like a charm!

Thanks for getting back here in the thread, @dancer51.

I'm glad that the recommendation provided by my colleague was able to help you with the situation you're facing. It's great to see satisfied customers that were able to resolve their issue in a short period of time.

In case you have any additional QuickBooks-related concerns or need help performing specific tasks in QuickBooks. Feel free to post here again. I'll be here, ready to help you. 

Do I create an invoice to put the check against? 

Thank you for posting here in the Community, Newbuzoldways.

Can you share more details about your concern? We just want to make sure that we're giving you the right steps and information to sort this out.

A screenshot of your view will be very much appreciated. Keep me updated in the comments below. Hope to hear from you soon. Take care always!

@JoshJ98 

Do I create an invoice to put the check against?

No, just make a deposit. Create an other income account called "Employee Retention Tax Credit" to assign that account to the deposit.

I understand creating the "other income" account called Employee Retention Tax Credit" but shouldn't we be able to offset it by quarter and separate the interest received for each quarter? 

I've followed these steps when we received the ERC refund.

But two months after, the owner wrote a check to 2 of its employees (funds are taken from the ERC deposit). How will I record the disbursement? 

Thanks for joining here in the Community thread, @ynnj.

First off, I appreciate you for following the steps recommended above by my colleague. Truly, no task is impossible if we work together. Allow me to chime in on this conversation and assist you in recording the disbursement of the funds taken from the ERC deposit. 

We have two options, to create an expense or write a check. To create an expense, please follow these steps:

1. Go to the + New icon then select Expense under Vendors.
2. Fill out the expense details.
3. In the Payee section, select the appropriate vendor or client who issued the check.
4. Select the bank account from which the funds were disbursed in the Payment account field.
5. In the Category column, select the account to which the disbursement amount should be allocated.
6. Enter the amount and fill in all the necessary fields.
7. When done, hit on Save and close.

On the other hand, you can also consider writing a check. 

However, I'd still suggest consulting your accountant to better advise you on the best way to record this and offer other options. This way, we can be sure that your books won't be messed up and that everything is recorded accordingly.

Additionally, please know that QBO has this feature that allows us to personalize our reports and focus on the data that matters the most to us. This includes choosing specific accounts, customers, clients, dates and even altering the format. To know how to utilize this feature, feel free to browse through this article: Customize reports in QuickBooks Online.

Keep your posts coming if you need a hand in recording disbursements in QuickBooks Online. I'd be glad to lend a helping hand and help you complete your business tasks. Assistance is just a reply away. Keep safe and have a good one.

If the deposit is posted in 2022 to this other income account (Employee Retention Credit), this will affect the P&L and Balance Sheet for 2022.  I am assuming the ERC received is for either year 2020 or 2021 or both.  The ERC received will need to be posted to the year the credit was applied to and an amended tax return will need to be filed to account for the reduction in the employer's tax liability.  Assuming the amended tax returns are filed, how do we zero out the ERC that was posted in 2022?  If this deposit is not zeroed out, it will be counted as income in 2022 P&L and the balance sheet will be off.  Please advice.

Thank you for checking out the Community space, vaughnn. I understand that maintaining accurate financial records is vital for your business, and it's commendable that you are taking the necessary steps to guarantee that everything is correctly recorded.

When a deposit is posted in 2022, it does indeed affect both the Profit and Loss and Balance Sheet for that period. The ERC received typically corresponds to the year when the credit was applied.

In order to reflect the correct financial position, it's necessary to make adjustments in QuickBooks Online. To get started, we'll have to edit the deposit and set the transaction date to 2021 or 2020. Here's how:

1. Go to the Accounting menu.
2. Choose Chart of Accounts.
3. Open the appropriate account.
4. Click the transaction to open it and make the necessary changes.
5. Click Save and close, then select OK.

If the deposit includes credits for both years, we will need to remove them by clicking More and selecting Delete. Then, recreate them individually with the accurate dates.

Please be aware that this approach can get tricky and complex, as it affects your previous reconciliations. In such cases, it is advisable to seek guidance from your accountant or bookkeeper who can assist you in reviewing your books accurately.

Alternatively, we can create a journal entry to directly offset the amount and eliminate the income impact on your financial statements. However, it is crucial to emphasize that this adjustment should be made in alignment with the amended tax returns. To ensure compliance, I highly recommend consulting with a tax professional. 

To learn how to track employee wages, taxes, deductions, and other expenses in QuickBooks Online, check out this article: Run payroll reports.

Should you have any further questions or require additional assistance in completing your other tasks, please don't hesitate to visit us again. We're here to help you every step of the way!

Thank you for your suggestion.  If I backdate the deposit I received in 2022 to 2021, wouldn't this action throw my bank's reconciliation off?  How would I adjust for this discrepancy for 2022?

Hello there,

Yes, you're correct. It will affect your reconciliation. You can follow these steps to resolve the reconciliation discrepancies you may encounter after you backdate the deposit you received in 2022 to 2021:

First comes reviewing opening and beginning balance. If accurate, proceed to the ending balance you entered from your bank statement. Here's how:

1. While reconciling an account, select Edit info from the Reconciliation window.
2. Examine the Ending balance and date.
3. Review your bank statements. Make changes as necessary.
4. When finished, click Save.

If there's still a difference in QuickBooks, you'll want to merge multiple transactions into a single one.

If your bank combined many payments into a single record, you should do the same in QuickBooks. We sometimes enter transactions separately, which leads us to believe there is an error.

If you discover that you did not combine both payments in QuickBooks, place them in the Undeposited Funds account. Then, to combine them, make a Bank Deposit.

For more of the other fixes issues and detailed information, refer to this article: Fix issues at the end of a reconciliation in QuickBooks Online.

Since these are past transactions, I recommend consulting your accountant to ensure the accuracy of your books.

I've provided this resource to assist you with the things required to accomplish them: QuickBooks Online year-end guide and checklist.

For additional QuickBooks-related concerns, don't hesitate to post them here in the Community. We're always available and willing to lend a hand to your queries. Have a great day ahead.

Backdating the deposit backdates the receipt of the interest as well.  We received a 1099-INT from the IRS, stating that all of the interest from our Employee Retention Tax Credit was 2023 income.  I'm thinking I need to have the deposit dated the date it was deposited to the bank (which takes care of any reconciliation issues), and then have a backdated journal entry for the tax credit portion of the deposit.  I'm thinking I want to create to new accounts on the chart of accounts for this, one being the Employee Retention Tax Credit income account recommended earlier in this thread, then an ERTC Holding account, maybe as an asset account?  Then split the deposit between interest income and the ERTC Holding account, using the date of the actual deposit.  Next, create a journal entry dated during the year of the original tax payment, debiting the ERTC Holding account, and crediting the Employee Retention Tax Credit income account for the amount of the actual tax credit.  Rather complex, yes, but does this sound reasonable?