Immediately following the issuance of Notice 2021-49, The American Institute of Certified Public Accountants (AICPA) requested the IRS make an exception and allow any necessary adjustments to be made on the 2021 income tax return. This resulted in the IRS receiving hundreds of thousands of paper returns claiming ERC refunds at a time when theyre facing the same issues as most employers: lack of qualified staff and safety concerns for those who are needed for this in-person work. The refunds have ranged from a few thousand dollars to over $1 million. Retention Credit claims. That jibes with warnings from tax pros and even the IRS itself that tax refunds this year would likely be smaller than in 2022, leading to what some experts are calling a "tax refund shock." 03-17-2021 06:57 PM. As you can see, there is a real benefit to qualification under the gross receipts test it is objective and it includes wages/health plan expenses for the entire calendar quarters of eligibility. The IRS is currently backlogged with millions of unprocessed payroll tax returns due to the changes in COVID-19 safety protocols and the volume of Employee Retention Credit (ERC) refund requests. There is no description of the facts and no analysis of the factors in IRS Notice 2021-20, Q&As 11-22 (the ERC claims at issue were all predicated on a partial suspension of business operations).. 7. Yes, the income on the income tax return will increase by the amount of the credit. 10. Notice 2021-49 provides that some businesses may qualify as severely distressed employers in the third and fourth quarters of 2021 if they experience a 90% decline in gross receipts compared to 2019 (see below for subsequent expiration of fourth quarter). Recall that constructive ownership rules apply here and that the related individual determination is quirky and can produce unexpected results. Employers are waiting as . It has been over 30 days since the resale platform closed and have not seen any refund processed. One method requires that an employer experienced a significant decline in gross receipts between the quarter in which eligibility is sought and the same quarter of 2019. 9. The taxpayer suffered a full or partial suspension of business operations due to a governmental order that limited commerce, travel, or group meetings due to COVID-19. That way there is money with which to pay the tax. Answer 41 of 41: Hi, Has anyone successfully received their refund from the resale of their tickets through FIFA? While many simply do not know about the tax credit, others have been found to prematurely disqualify their enterprise based on outdated guidelines. We can help your canna-biz take advantage of the program making the process . 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The ERC for these businesses is limited to $50,000 per quarter. igotmyrefund.com is for people awaiting their tax refunds. The most important step a business can take is to discuss this tax credit with their tax advisor. We filed in early fall of 2021 knowing that it would not be received before the end of the year, but fulling expecting it to come before Tax Deadline. In general, anybody related to a more-than-50% owner by blood or by marriage cant be included in the ERC. However, the IRS administration of the ERC program and especially those claimed on amended returns should serve as a caution to Congress and the Treasury. The phone service is overwhelmed with wait times in the hours and hundreds of thousands of pieces of unopened mail, leaving taxpayers in the dark about when refunds will be received. If you have any questions about how this new guidance on the ERC affects your business, please contact your Plante Moran advisor. However, if the credit is taken retrospectively, an amended income tax return must be filed to properly report the credit. I filed an amended 941 early this summer and received the refund check a few weeks ago. Claims may require months of processing time, and theres little that taxpayers can do to check on the status or timeline. All rights reserved. Treasury Secretary Yellen in a memorandum to IRS Commissioner Rettig outlined priorities which the media in particular has emphasized clearing the backlog of filings to be processed (including the ERC); improved taxpayer service; systems modernization; and hiring (the IRS has two challenges here replacing the significant number of IRS employees available to retire as well as the stated goal of increasing overall the number of IRS employees all in a very tight labor market for tax professionals). The notice confirmed tips received by employees count as qualified wages for employers calculating credit amounts and that employers could claim both an ERC and a FICA tip credit for the same tips. Congress can rightly be pleased with the results of the tax policy. The written advice some of these companies provide to their clients is lacking. Large refunds (over $1 million or higher) could even see further delays due to the additional review required before those refunds can be issued. Mark as New; Bookmark; Subscribe; Permalink; . Employee Retention Credit Still The One. 18. In other words, the ERC is limited to $28,000 per employee for 2021 (but, as noted above, the Reconciliation bill seeks to change this by ending the ERC September 30, 2021). Opinions expressed by Forbes Contributors are their own. This is a non-issue when the credit is taken in the year in which the income tax return is prepared. As the ERC applications were being completed, via amended payroll reports for 2020, there was uncertainty on whether the IRS would require the taxpayer to amend previously filed income tax returns or allow an exception for the taxpayer to make any necessary adjustments on the 2021 income tax return. This is a BETA experience. With the many changes to original guidelines and regulations, the credit has become intimidating and confusing for many. Audit. Section 2301 of the CARES Act added the employee retention credit, a refundable payroll tax credit equal to 50% of qualified wages (wages, including qualified health plan expenses allocable to the wages) paid by eligible employers to certain employees from March 13, 2020, to Dec. 31, 2020 (now . Did the taxpayer apply aggregation for purposes of (i) the gross receipts test, (ii) the suspension of operations test, (iii) the calculation of the number of FTEs, and (iv) the determination of the maximum credit amount per employee? Copyright 2023 CBS Interactive Inc. All rights reserved. In general, taxpayers may also qualify for administrative relief from penalties for failing to pay on time under the IRS's First Time Penalty Abatement program if the taxpayer: For general information, visit the Penalty Relief page on IRS.gov. Although most U.S. taxpayers are expected to get their tax refunds within 21 days of filing their returns, two groups have faced . Some of them take an extremely broad interpretation of that test and use its subjectivity as a sword. Another nice thing about the gross receipts test if that if it is met for a particular calendar quarter, then the taxpayer can include in the ERC calculation wages and health plan expenses paid during the entire calendar quarter, and in some cases the taxpayer can automatically qualify for a second quarter as well. Since the ERC was originally enacted in 2020, taxpayers have been asking for clarification on the impact that other COVID-19 relief might have on a businesss gross receipts. Recall there is a 10% safe harbor in Notice 2021-20, Q&A #11. Positive sign Because of the jump in early filings, the IRS has issued more refunds so far compared with a year . 2. 16. The suspension of operations test is a subjective test. If YES, what was your timeframe? 11. macphoto469 2 yr. ago We can answer your questions and assist you with the employer retention credit, CARES Act, tax consulting, and filing options. IRS Notice 2021-49 answered several additional questions that had caused uncertainty for taxpayers hoping to claim the ERC. Further, too often when they do finally talk to an IRS representative the IRS staff are unable to provide any substantive and useful information about the specific claim and when a check will be issued. Obviously not for 90% plus of people, but there are some people where that upfront cash would make or break their business. 2. Click the Banking menu, then select Make deposit. Our article from November 2021has an in-depth discussion of the ERC expiration and how retroactive claims will work. Slow processing of amended returns has meant significant delays in business owners and charities getting much-needed relief checks in their hand. Cookie Notice: This site uses cookies to provide you with a more responsive and personalized service. The memos are more than 20 pages in length but as far as we can tell, only two or three lines of text are different. The taxpayers employees were not able to work comparably through telework. By using this site you agree to our use of cookies. The IRS states that taxpayers shouldnt file second returns claiming the same refund, as that will likely result in even longer delays while the duplicate claims are investigated. Through Feb. 3, the IRS had received 19 million filings, about 2.3 million more than the same period a year ago. Did the taxpayer include the correct qualifying wages for small eligible employers (all wages paid during the relevant period) and for large eligible employers (only wages paid not to provide services during the relevant period)? I recognize and appreciate that the IRS is laboring under last-minute (multiple) changes in tax laws as well as antiquated systems and staffing challenges but Congress has now provided $80 billion. Therefore, if an employer files a refund claim for an ERC for a quarter in 2020, the adjustment to taxable income equal to the ERC must also be included on its 2020 federal income tax return, even if that refund claim is filed in 2021 or later. . In talking to my colleagues at alliantgroup who have helped thousands of businesses qualify for the ERC the delays in processing are deeply frustrating for business owners and charities. 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