From now on, the only way to apply for the Employee Retention Credit (ERC) is to file an amended Form 941X (Quarterly Federal Payroll Tax Return) for the quarters in which the company was an eligible employer. The ERC was a tax credit in which business owners received a refundable tax credit for keeping employees on the payroll during the COVID-19 pandemic. The CARES Act authorized the ERC to encourage companies to keep employees on the payroll. If you haven't yet applied for your qualifying wage tax credits and you're applying for ERC retroactively, you'll need to file IRS Form 944-X or 943-X.
You won't be taxed on the money you receive and you shouldn't include it in your gross income for the tax year in which you receive the money. Keep in mind that these forms modify the payroll tax return documents that you already filed at the end of the corresponding quarter. You can only apply for the ERC on your payroll tax return, not on an income tax return. Yes, you can still apply for the employee retention tax credit if you received a loan from the Check Protection Program during the COVID-19 crisis.
The purpose of the ERC was to encourage employers to keep employees on the payroll even if they weren't working during the period covered due to the effects of the coronavirus outbreak. To receive ERC funds, you'll need to file a series of tax forms, starting with IRS Form 941, which is your quarterly federal tax return, for the quarters in which you paid salaries that were eligible for the ERC. An accountant, tax professional or specialist specializing in ERC can help you determine what documents you must submit to obtain the credit and how to complete the correct tax form for your company. If they delayed payroll taxes before receiving the ERC in the fourth quarter, they had to determine any underpaid tax amounts and prepare to resolve those problems.
However, the refund you receive from the ERC does affect the deductible wages for the tax year in which you paid the salaries that qualify for the ERC.