Organizations that are eligible employers can still apply for the Employee Retention Credit (ERC) by modifying their Form 941 X for the quarters in which they were eligible. The ERC is a tax credit that eligible businesses can apply for to cover some of their payroll taxes. It is not a loan and no repayment is required. If your Form 941 didn't request the correct amount for the ERC because you received a small business interruption loan under the Paycheck Protection Program (PPP), you can file Form 941-X and complete worksheet 2 to request the correct amount of the credit.
Adjustments to qualified health plan expenses attributable to the ERC are listed on Form 941-X, line 31a. If you overreported taxes on Form 941 and chose to apply the credit to Form 941 or Form 944, file an adjusted return on Form 941-X shortly after discovering the error, but more than 90 days before the statute of limitations for the credit or refund on Form 941 expires. If you are correcting the qualifying wages for the ERC that you stated on line 21 of Form 941, enter the total amount corrected for all employees in column 1.If you applied for the COBRA premium assistance credit and make any corrections to Form 941-X to the amounts used to calculate this credit, you will need to recalculate the amount of this credit using worksheet 5.You must check the box on line 2 if you have a credit (a negative amount) on line 2 and the prescription credit or refund period for Form 941 will expire within 90 days of the date you file Form 941-X.If you didn't check the box on line 18b of the Form 941 you originally filed, but are now applying for the ERC as a recovering startup, check the box on line 31b. However, you cannot file a Form 941-X to correct the incorrect amount of additional Medicare tax that was actually withheld from an employee the previous year, including the amount they paid on behalf of their employee, rather than deducting it from the employee's pay (resulting in additional taxable wages). The IRS will notify you if the credit you requested changes or if the amount available as a credit on Form 941 or Form 944 was reduced due to non-payment of taxes, penalties, or interest. You cannot use any credit shown on another Form 941-X to pay the amount you owe, even if you filed the request for the amount due and the credit at the same time.
If you applied for the ERC on your original Form 941 for the quarter and make any corrections on Form 941-X for the quarter to the amounts used to calculate this credit, you will need to recalculate the amount of this credit using worksheet 4 or worksheet 2.For employers who discovered that they could have left unclaimed credits, perhaps due to lack of benefit allocations related to qualified sick or family leave or ERC, there is a definite expiration date for modification. We can help employers calculate credits, file 941-X to apply for ERCs, review pre-calculated credits, determine requirements for credits, assist with IRS audits related to 941-X and help resolve delays in credits. If you are another external payer who did not file Schedule R (Form 94) along with Form 941 because you did not meet these requirements, but who now file Form 941-X to declare these credits or deferral of employer or employee participation in social security taxes for your clients, you must now file Schedule R (Form 94) and attach it to Form 941-X.