Employers can still apply for the ERTC retroactively by filing Form 941-X, the employer's adjusted quarterly federal tax return or refund request, for each quarter in which they have paid the qualifying wages. Employers can file Form 941-X up to three years after the original payroll tax due date, which is normally April 15.The employee retention credit is equal to 50 percent of the qualifying wage (including qualified health plan expenses) paid by an eligible employer in a calendar quarter. An eligible employer requests the ERC on the employer's federal employment tax returns listed on IRS Form 941.The employee retention credit is a refundable credit that employers can request on certain payroll taxes. The credit is fully refundable because the eligible employer can receive a refund if the amount of the credit exceeds certain federal employment taxes owed by the eligible employer.
Unlike many other tax credits available to small business owners, the ERC doesn't offset income taxes. It also includes qualified health plan expenses paid to those employees, even if the company did not pay the employee any other wages. The Relief Act increased the operating employee threshold from 100 full-time employees to 500 full-time employees. The employee retention credit under the CARES Act encourages companies to keep employees on their payroll.
However, large employers can only claim it for employee salaries and health insurance premiums paid while employees were not working due to a pandemic-related shutdown. The employee retention credit is a fully refundable tax credit for employers that is equivalent to 50 percent of qualified wages (including allowable qualified health plan expenses) that eligible employers pay to their employees. The term “non-refundable” is an inappropriate name if the taxpayer did not apply for the ERC and instead paid the employer's portion of the Social Security tax through federal tax deposits. However, you cannot apply the credit to wages that were forgiven or are expected to be forgiven under the PPP loan program.
For more information and examples, see Determining the Maximum Amount of an Eligible Employer's Employee Retention Credit. The Coronavirus Aid, Relief and Economic Security Act (CARES Act) originally established the ERC to encourage companies to keep employees on payroll during the pandemic. The ERC is fully refundable because the eligible employer can receive a refund if the amount of the ERC exceeds the applicable employment taxes due by the eligible employer.
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