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Employee Retention Credit: Over But Not Done

The federal government’s Employee Retention Credit (ERC) proved to be a lifeline for many businesses and their employees. The eligibility rules were complex and changed over time. Not all owners may have been able to figure out whether they were eligible; however, the IRS is giving them a break: Even though the program has ended, employers are still able to file for tax relief retroactively.

According to the IRS, most taxpayers became ineligible to claim the ERC for wages paid after September 30, 2021. (A recovery startup business can still claim the ERC for wages paid after June 30, 2021 and before January 1, 2022.) However, companies have three years to claim benefits they’re entitled to.

The key is Instructions for Form 941-X, ‘Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.’ It’s a complicated form, but it clearly notes, “Generally, you may correct overreported taxes on a previously filed Form 941 if you file Form 941-X within three years of the date Form 941 was filed or two years from the date you paid the tax reported on Form 941, whichever is later.”

The bottom line? If you haven’t been sure whether you were eligible for the ERC during its open period, you have some breathing room to see if you are retroactively entitled. Don’t leave the money sitting on the table any longer; contact one of our tax advisors to discuss the law’s many nuances as soon as possible to make sure you get every dollar you’re entitled to.

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