IRS Notice 2021-49, released in August 2021, clarified that the deduction for qualified wages is reduced for the tax year in which the wages were paid or incurred if an employer receives an ERC.
- 2020 ERC Claim: Your company should amend its 2020 federal income tax return or, if applicable, submit an administrative adjustment request (AAR) to reflect the wage deduction correctly.
- 2021 ERC Claim: If your company has not yet filed its 2021 federal income tax return, it may adjust the wage deduction on its original return. If the 2021 return has already been filed, you may submit a superseded return until the extended due date to adjust. For any other situation, you should file an amended 2021 tax return (or AAR, as necessary) to adjust the wage deduction.
For ERC filing, you will typically need your payroll tax forms, payroll employee summary reports, PPP forgiveness applications, and quarterly sales summaries from 2019 to 2021.