74. Can An Eligible Employer Receive An Advance Of The Employee Retention Credit To Fund The Payment Of Qualified Wages If The Eligible Employer Does Not Have Sufficient Federal Employment Taxes Set Aside For Deposit To Cover Those Payments?

Frequently asked question #74 “Can an Eligible Employer receive an advance of the Employee Retention Credit to fund the payment of qualified wages if the Eligible Employer does not have sufficient federal employment taxes set aside for deposit to cover those payments?” under the How to Claim the Employee Retention Credit section of FAQs: Employee Retention Credit under the CARES Act, provided by the IRS.gov to help business owners understand the ERC program. Information is below for the question #74 Can an Eligible Employer receive an advance of the Employee Retention Credit to fund the payment of qualified wages if the Eligible Employer does not have sufficient federal employment taxes set aside for deposit to cover those payments?

ERC Credit Frequently Asked Question #74:

How to Claim the Employee Retention Credit FAQs

74. Can an Eligible Employer receive an advance of the Employee Retention Credit to fund the payment of qualified wages if the Eligible Employer does not have sufficient federal employment taxes set aside for deposit to cover those payments?

Yes. Because quarterly employment tax returns are not filed until after qualified wages are paid, some Eligible Employers may not have sufficient federal employment taxes set aside for deposit to the IRS to fund their qualified wages through reduction of the amount to be deposited, particularly after taking into account the permitted deferral of the employer’s share of social security tax under section 2302 of the CARES Act. Accordingly, the IRS has a procedure for obtaining an advance of the refundable credits.

The Eligible Employer is permitted to defer the deposit and payment of the employer’s share of social security tax under section 2302 of the CARES Act and may do so prior to reducing any deposits in anticipation of the credit. 

See Deferral of employment tax deposits and payments through December 31, 2020. If the remaining employment tax deposits set aside, after taking into account any deferral of the employer’s share of social security tax and any permitted reduction in employment tax deposits in anticipation of the FFCRA paid leave credits, are less than the qualified wages, the Eligible Employer can file a Form 7400, Advance Payment of Employer Credits Due to COVID-19, to claim an advance credit for the remaining qualified wages it has paid for which it did not have sufficient federal employment tax deposits.

If an Eligible Employer fully reduces its required deposits of federal employment taxes otherwise due on wages paid in the same calendar quarter to its employees in anticipation of receiving the credits, and it has not paid qualified wages in excess of this amount, it should not file a Form 7400. 

If it files a Form 7400, it will need to reconcile this advance credit and its deposits with the qualified wages on Form 941, Employer’s Quarterly Federal Tax Return (or other applicable federal employment tax return such as Form 944 or Form CT-1), beginning with the Form 941 for the second quarter, and it may have an underpayment of federal employment taxes for the quarter.

Example: Employer G paid $20,000 in qualified wages to two employees (each employee was paid $10,000 in qualified wages), and is therefore entitled to a credit of $10,000, and is otherwise required to deposit $8,000 in federal employment taxes on all wages paid, after deferring its employer’s share of social security tax under section 2302 of the CARES Act. Employer G has no paid sick or family leave credits under the FFCRA. 

Employer G can keep the entire $8,000 of taxes that Employer G was otherwise required to deposit without penalty as a portion of the credits it is otherwise entitled to claim on the Form 941. Employer G may file a request for an advance credit for the remaining $2,000 by completing Form 7400.

For more Internal Revenue Service (IRS) Department of the Treasury Employee Retention Credit (ERC) How to Claim the Employee Retention Credit FAQs, visit the official IRS.gov tax website.

Conclusion and Summary on ERC Credit FAQ #74. Can an Eligible Employer receive an advance of the Employee Retention Credit to fund the payment of qualified wages if the Eligible Employer does not have sufficient federal employment taxes set aside for deposit to cover those payments?

The “Can an Eligible Employer receive an advance of the Employee Retention Credit to fund the payment of qualified wages if the Eligible Employer does not have sufficient federal employment taxes set aside for deposit to cover those payments?” is Frequently Asked Question #74 of many commonly asked questions small business owners are wondering about how to file the Employee Retention Tax Credit (ERTC). The IRS ERC Tax Credit program is a confusing and complex process to determine the correct ERC calculations your business qualifies for. Answers to “Can an Eligible Employer receive an advance of the Employee Retention Credit to fund the payment of qualified wages if the Eligible Employer does not have sufficient federal employment taxes set aside for deposit to cover those payments?” and filling out form 941-X may change slightly from frequently updated rules and regulations from the IRS. Leave a comment below if you have further questions on ERC Credit FAQ #74.

Help Completing / Filing / Claiming the Employee Retention Credit (ERC)

Receive Up to a $26,000 ERC Credit from the IRS Per Employee

Disaster Loan Advisors can assist your business with the complex and confusing Employee Retention Credit (ERC), Form 941-X, and the Employee Retention Tax Credit (ERTC) program. 

Depending on eligibility, business owners and companies can receive up to $26,000 per employee based on the number of W2 employees you had on the payroll in 2020 and 2021.

The ERC / ERTC Tax Credit Program is a valuable IRS tax credit you can claim. This is money you have already paid to the IRS in payroll taxes for your W2 employees.

We DO NOT charge a percentage (%) of your ERC Refund like some companies are charging. Some ERC firms out there are charging upwards of 15% to 35% of your ERC refund!

Our professional ERC fee and pricing structure is very reasonable in comparison.

If you are looking for an ERC Company that believes in providing professional ERC Services and value, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors is a good fit for you. 

Schedule Your Free Employee Retention Credit Consultation to see what amount of employee retention tax credit your company qualifies for.

Cover Image Credit: Irs.gov / ERC FAQ / Disaster Loan Advisors.

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