IRS's backlog in processing claims for the ERC, some taxpayers are incurring an increased income tax liability but have not yet received their ERC refund. The IRS default response: It has been received and awaiting processing is not bringing joy to mudville. The delay means given the requirement to reduce deductions (280C) on the federal income tax returns some business owners have to take funds out of pocket and pay taxes now, while they may wait many months for these pandemic relief funds. . Example #2: An employer received a PPP loan of $200,000. Click here to reach out to us for more information. The employer cannot use any of the $100,000 of payroll costs to claim the ERC. UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc., and its subsidiary entities. To get the ERC money back in the form of a refund on taxes already paid, business must fill out an advance payment form, or Form 7200 with the Department of Treasury's Internal Revenue System,. Eligible employers can claim the ERC on an original or adjusted employment tax return for a period within . Copyright @2023 TigerDroppings.com. 13. The notice confirmed tips received by employees count as qualified wages for employers calculating credit amounts. The average refund is around $130,000. In general, anybody related to a more-than-50% owner by blood or by marriage cant be included in the ERC. If you filed early on, the IRS is saying you can expect the refunds 6 to 9 months from filing. Congress needs to ensure that the IRS and Treasury are focused on these priorities. Recovery startup businesses become eligible for the ERC and severely distressed employers get to expand the amount of wages that they include in the ERC calculation. Im sure these lengty delays are not what Congress intended when they issued the press releases cheering the passage of ERC. This includes your procedures being limited by commerce, lack of ability to take a trip or restrictions of team meetings Gross invoice reduction requirements is various for 2020 as well as 2021, however is determined versus the existing quarter as compared to 2019 pre-COVID quantities What does an amended return mean for you? Wealth Management. Claim your ERC Refund TODAY! Legal Statement. IRS Notice 2021-49 answered several additional questions that had caused uncertainty for taxpayers hoping to claim the ERC. CHICAGO - NOVEMBER 1: Current federal tax forms, are distributed at the offices of the Internal Revenue Service November 1, 2005 in Chicago, Illinois. 2023 CBS Interactive Inc. All Rights Reserved. However, if you wait and the IRS doesnt allow an exception, we will have to extend your corporate and personal income tax returns for 2021 as we will need time to prepare the 2020 amended tax returns first. Huh? The reason for the lower refunds stems from the expiration of pandemic tax credits and other benefits, ranging from the expanded Child Tax Credit to three rounds of federal stimulus checks. The number of AM calls answered by an assistor to date in FY 2022 is 20 percent, and for the same period in FY 2021 it was 16 percent. The most important step a business can take is to discuss this tax credit with their tax advisor. The IRS created a special safe-harbor rule that allows taxpayers to exclude amounts received from the COVID-19 relief programs. This includes your operations being restricted by business, inability to take a trip or constraints of group conferences. 3. GT Many businesses have assumed that the ERC is a loan program like PPP. Recall that an FTE for this purpose is an employee that worked 30 hours/week or 130 hours/month, and that a monthly average for 2019 is required. 3. For 2021, the Federal Government boosted the credit to 70% against the first $10,000 in wages per quarter (quarters 1, 2, 3). For example, even if an employer made more money during the pandemic than said employer did in prior years, they may still qualify for the ERC. / MoneyWatch. We can help your canna-biz take advantage of the program making the process . Recall that constructive ownership rules apply here and that the related individual determination is quirky and can produce unexpected results. The report underscores the need for IRS to prioritize taxpayer services and processing with the new funding Congress has provided. September 9, 2022 by Max Shenker. 04-12-2022 05:25 PM. Well deliver accounting insights and advice straight to your inbox. Gross invoice decrease criteria is various for 2020 as well as 2021, however is determined against the current quarter as compared to 2019 pre-COVID amounts . Many businesses with large refunds in the millions, however, are already waiting from nine to twelve months. In Revenue Procedure 2021-33, the IRS created a special safe-harbor rule that allows taxpayers to exclude amounts received from the COVID-19 relief programs listed above from the calculation of gross receipts solely for the purpose of determining ERC eligibility. One positive note: The IRS appears to be in a better position to process returns quickly than in prior pandemic years, given its hiring of more than 5,000 new telephone customer service agents and more in-person staff to help people file their returns, Bank of America said. See, e.g., Notice 2021-20, Q&A #28. 17. Why sign in to the Community? Over 165 million tax returns were received and processed for the 2022 tax season. We have been waiting for the IRS to respond to the AICPAs request before moving forward with the preparation of amended tax returns. Consulting. The reason for the decline in gross receipts is irrelevant. It is based upon qualified earnings as well as medical care paid to staff members. Audit. Did the taxpayer calculate correctly the number of full-time employees (FTEs) in 2019? This new guidance answers some questions that date back to the enactment of the original credit in March 2020 and clarifies eligibility requirements and calculations for the credit through the third and fourth quarters of 2021. Did the taxpayer exclude from qualifying wages severance and other post-termination payments made to former employees? If you have any questions about how this new guidance on the ERC affects your business, please contact your Plante Moran advisor. With tax season in full swing, the IRS is offering a peek at early tax filings, and the number so far may bode ill for Americans hoping for a juicier refund. Receive up to $26,000/per employee retained during the pandemic. Many taxpayers, however, do not meet the gross receipts test and must rely on the suspension of operations test, which is subjective and generally includes wages/health plan expenses only for the period of the suspension. See Notice 2021-20, Q&A #13. Were the taxpayers employees able to work comparably through telework? This IRS communication reminds taxpayers that . Recall there are other credits, such as FFCRA paid family/sick leave credits, that must be considered too. April 15 is the deadline in the United States for residents to file their income tax returns. Millions of businesses across the U.S. haven't, and now the IRS is requesting. The average refund check so far this year: $1,963, or almost 11% lower than compared to the same time a year earlier, when refunds were averaging about $2,200 per filer. UHY Advisors, Inc., and its subsidiary entities are not licensed CPA firms. The memos are more than 20 pages in length but as far as we can tell, only two or three lines of text are different. WASHINGTON The Department of the Treasury and the Internal Revenue Service have received requests from taxpayers and their advisors for relief from penalties arising when additional income tax is owed because the deduction for qualified wages is reduced by the amount of a retroactively claimed employee retention tax credit (ERTC), but the taxpayer is unable to pay the additional income tax because the ERTC refund payment has not yet been received. Information released by the IRSs Taxpayer Advocate indicates that phone hold times can be very long and that only a small percentage of those callers are actually able to speak directly with a representative. The phone service is overwhelmed with wait times in the hours and hundreds of thousands of pieces of unopened mail, leaving taxpayers in the dark about when refunds will be received. Cannabis Business NOW qualify for the ERC tax refund! With Congress recently emptying the money sacks for IRS staffing an additional $80 billion over ten years the Treasury and IRS need to make a priority of taxpayer service and a good place to start would be with the ERC program. As of June 15, 2022, we had 3.7 million unprocessed Forms 941. Some of them take an extremely broad interpretation of that test and use its subjectivity as a sword. The notice did exactly that, and concluded that the owner cant be included in the ERC if that individual has a living sibling, spouse, ancestor, or lineal descendant (because that living family member will constructively own more than 50% of the business and the legal owner will be related to the constructive owner). The statement describing the backlog also asks that taxpayers not contact the IRS about the status of their returns. This puts them in a difficult position by having to pay additional taxes without having the cash for remittance. It has been over 30 days since the resale platform closed and have not seen any refund processed. Be especially wary of the ones that overstate their credentials or ability to provide advice regarding the ERC. This is another case that is far from the reality of the situation. Ensure it has the correct date. They charge 10-13% of the tax credit amount, but when its free money some people have chosen to take the cash advance. This is far from the truth. The benefit of the gross receipts test is that it is objective taxpayers need only show a decline in gross receipts of more than 50% in any calendar quarter in 2020, or more than 20% in any of the first three calendar quarters in 2021. Lets now review the general rules of the ERC and explore some of the areas where the IRS is likely to inquire of all taxpayers on audit. ERC comes in the form of a refund check. Millions of Americans could get their tax refunds starting March 1. Note: This fact sheet was revised on December 6, 2021 to reflect recent updates to the ERC. If a business is concerned with the analysis underlying its claim, then now is the time to have it reviewed. Every dollar that is calculated is money rightfully owed to the enterprise. That means the vast majority of Americans have yet to file their taxes; the average refund is likely to change as the April 18 tax filing deadline draws near. The IRS is struggling to process hundreds of thousands of employee retention credit refunds. Here are the details. I dont handle our financial matters for my company so I might be off on the details but I know we filed in late 2021 because I had to pay taxes on it even though I did not get my share of the money yet. time. Further, too often when they do finally talk to an IRS representative the IRS staff are unable to provide any substantive and useful information about the specific claim and when a check will be issued. All rights reserved. Because this credit can apply to wages paid after March 12, 2020, many employers who are/were struggling can get access to said credit and gain much-needed relief. All rights reserved. Start Filing for Free Today When Can I Expect My Refund? The Employee Retention Credit (ERC) has undoubtedly proven to be one of. 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