Can An Eligible Employer Receive An Advance Payment Of The Employee Retention Credit If The Eligible Employer Does Not Have Sufficient Federal Employment Taxes Set Aside For Deposit To Cover The Amount Of The Anticipated Credit? – #51 ERC IRS Notice 2021-20

October 29, 2022

Question #51:
Can an eligible employer receive an advance payment of the employee retention credit if the eligible employer does not have sufficient federal employment taxes set aside for deposit to cover the amount of the anticipated credit?

Found under the J. Claiming the Employee Retention Credit section of the Employee Retention Credit (ERC) IRS Notice 2021-20 with updated guidance to help business owners follow the current ERC rules. 

The answer to question #51, Can an eligible employer receive an advance payment of the employee retention credit if the eligible employer does not have sufficient federal employment taxes set aside for deposit to cover the amount of the anticipated credit?, can be found below.

ERC IRS Notice 2021-20 Question #51:

J. Claiming the Employee Retention Credit

Can an eligible employer receive an advance payment of the employee retention credit if the eligible employer does not have sufficient federal employment taxes set aside for deposit to cover the amount of the anticipated credit?

Yes. If an eligible employer does not have sufficient federal employment taxes set aside for deposit to cover the amount of the anticipated credit, the eligible employer may request an advance payment of the credit. The amount of the advance payment will depend on the application of other relief provisions to the employer. For example, eligible employers are permitted to defer the deposit and payment of the employer’s share of social security tax under section 2302 of the CARES Act and the employee’s share of social security tax under Notice 2020-65 and may do so prior to reducing any deposits in anticipation of the credit.

 Therefore, assuming an employer defers deposit of social security tax under section 2302 of the CARES Act and Notice 2020-65, the employer should take into account any permitted reduction in employment tax deposits due to (1) deferral under section 2302 of the CARES Act, (2) deferral under Notice 2020-65, (3) any anticipated credits under sections 7001 and 7003 of the FFCRA related to qualified sick leave wages and qualified family leave wages that the employer paid, and (4) for any tax-exempt organization employer, any credit under section 303(d) of the Relief Act, before determining the amount that it should request as an advance payment of the employee retention credit. If the remaining employment tax deposits set aside are less than the anticipated credit for the qualified wages, the eligible employer can file a Form 7200 to request an advance payment of the credit for the remaining amount of the anticipated credit.

If an eligible employer fully reduces its required deposits of federal employment taxes otherwise due on wages paid in anticipation of receiving the credit, and that reduction covers the full amount of the anticipated credit, it should not file a Form 7200.

Example: Employer B 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. Employer B is otherwise required to deposit $8,000 in federal employment taxes on all wages paid to all employees, after deferring its employer’s share of social security tax under section 2302 of the CARES Act. Employer B did not choose to use the relief under Notice 2020-65 to defer the employee’s share of social security tax. Employer B has no credits under sections 7001 and 7003 of the FFCRA. Employer B is not a tax-exempt organization eligible for the credit under section 303(d) of the Relief Act. Employer B can keep the entire $8,000 of taxes that Employer B was otherwise required to deposit without penalty as a portion of the credit it is otherwise entitled to claim on the Form 941. Employer B may make a request for an advance payment of the credit for the remaining $2,000 by submitting Form 7200.

For more information about the Employee Retention Credit (ERC) IRS Notice 2021-20, visit the Internal Revenue Service (IRS) Department of the Treasury, official IRS.gov tax website.

Conclusion and Summary on Can an eligible employer receive an advance payment of the employee retention credit if the eligible employer does not have sufficient federal employment taxes set aside for deposit to cover the amount of the anticipated credit? – #51 ERC IRS Notice 2021-20

The answer to Question #51: “Can an eligible employer receive an advance payment of the employee retention credit if the eligible employer does not have sufficient federal employment taxes set aside for deposit to cover the amount of the anticipated credit?” was answered in detail above. It was found under section “J. Claiming the Employee Retention Credit” in IRS Notice 2021-20. 

Leave a comment below if you have further questions on the Employee Retention Credit (ERC) or for clarifications on Can an eligible employer receive an advance payment of the employee retention credit if the eligible employer does not have sufficient federal employment taxes set aside for deposit to cover the amount of the anticipated credit?

Employee Retention Tax Credit (ERTC): Expert Assistance to Claim Your Business ERC Credit 

Up to a $26,000 ERC Refund from the IRS for Each 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.

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 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 / IRS Notice 2021-20 / Disaster Loan Advisors.

Mark Monroe
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