COVID-19 Employee Retention Credit

important
The Infrastructure Investment and Jobs Act, signed into law by President Biden on November 15, 2021, retroactively terminated the Employee Retention Credit for non-Recovery Start-up Businesses as of October 1, 2021. We recommend data entry be reviewed based on the latest IRS guidance issued in Notice 2021-65.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, Consolidated Appropriations Act of 2020, and American Rescue Plan Act of 2021 provide payroll tax relief for employers by providing an Employee Retention Credit.
Using the Employee Retention Credit, in 2020 employers can receive a credit to their federal taxes of 50 cents for every dollar of wages (up to $10,000.00 of qualifying wages) that an employee is paid between March 13, 2020, and December 31, 2020. The maximum credit paid for an employee is $5,000.00 for the year.
In 2021, employers can receive a credit to their federal taxes of 70 cents for every dollar of wages (up to $10,000.00 of qualifying wages) that an employee is paid, per quarter, through September 30, 2021 (or December 31, 2021 if the business is a Recovery Start-up business). The maximum credit paid for an employee is $7,000.00 per quarter.
For detailed information about this credit, read the IRS Employee Retention Credit FAQs.
tip
Thomson Reuters Labs has designed an interactive Employee Retention Credit Eligibility Tool to help you determine if a business qualifies for the Employee Retention Credit.

Clients that have 500 or fewer employees

For payroll checks between March 13, 2020 and June 30, 2021,
Accounting CS
uses employer FICA-SS taxable wages as the basis for qualifying wages, regarding this credit, and can generate an Employee Retention Credit liability adjustment for
all employee payroll checks
that are entered in the quarters that you specify. For payroll checks between July 1, 2021 and December 31, 2021,
Accounting CS
uses employer FICA-Med taxable wages as the basis for qualifying wages. If a particular employee should be excluded from the Employee Retention Credit calculation, mark the
Exclude from Employee Retention Credit
checkbox in Setup > Employees > Payroll Taxes tab > COVID-19 Settings.
note
Note:
The application uses the GL Expense account number associated with the FIT item on the Payroll Taxes tab of the Setup > Clients screen when creating the credit liabilities.
Use the following method to automatically create liability adjustments for employees who are eligible to claim the Employee Retention Credit.
  1. Select
    Setup
    , then
    Clients
    .
  2. Select the client that is claiming the credit.
  3. Select the
    COVID-19 Acts
    tab.
  4. Mark the checkboxes for the quarters in which the client is claiming the credit and then save the client record.
    note
    When you process payroll for the client,
    Accounting CS
    makes the liability adjustments automatically
  5. Run the Employee Retention Credit Summary report (available from the Accounting CS Library) to verify the amounts.
Use the following method to manually create liability adjustments for payroll checks created
before
you turned on the Employee Retention Credit.
  1. To determine the appropriate credit amount, run the
    Employee Retention Credit Summary
    report, available from the Accounting CS Library.
  2. Select
    Actions
    , then
    Manage Payroll Liabilities
    .
  3. Select
    Add Liability
    .
  4. Select
    941/943 - Internal Revenue Service
    in the
    Vendor
    field.
  5. Select
    FIT Employee Retention Tax Adj
    in the
    Item
    field.
  6. Make
    Notes
    if needed.
  7. Enter the transaction date.
    note
    This should match the payroll check date in which the employee wages were included.
  8. Enter negative Amount to match the wages eligible for the credit.
  9. Select
    OK
    .

Clients with 501 or more employees

For these clients, taxable wages that qualify for the Employee Retention Credit are wages paid to employees who are
not performing services
between March 13, 2020, and December 31, 2020 (for 2020) or during 2021. 
Because
Accounting CS
can't accurately calculate automated liability adjustments for only those employees who are being paid for work not performed, we cannot support automatic liability adjustments for these clients.
important
DO NOT mark the quarter checkboxes in the COVID-19 Acts tab of the Setup > Clients screen for these clients. This will create liability adjustments for
all
of the employees' hours, causing incorrect calculations. If this happens, you will need to either delete the liability adjustment, or manually override the 941 quarterly reports with the correct values for the Employee Retention Credit.
You can take the following steps to manually create liability adjustments for the Employee Retention Credit.
  1. Determine the appropriate credit amount.
    note
    This will vary by client, but if you created a new pay item to use for employees not performing services you might run a report such as the Wage Register report, filtered down to the appropriate employees or pay items.
  2. Select
    Actions
    , then
    Manage Payroll Liabilities
    .
  3. Select
    Add Liability
    .
  4. Select
    941/943 - Internal Revenue Service
    as the
    Vendor
    .
  5. Select
    FIT Employee Retention Tax Adj
    for the
    Item
    field.
  6. Enter notes in the
    Notes
    field (optional).
  7. Enter the transaction date. This should match the payroll check date in which the employee wages were included.
  8. Enter a negative
    Amount
    that matches the wage amount paid for the hours the employees weren't working.
  9. Select
    OK
    .

Deleting an Employee Retention Credit liability adjustment

Follow these steps if you need to delete an Employee Retention Credit liability adjustment.
  1. Select
    Actions
    , then
    Manage Payroll Liabilities
    .
  2. Select
    +
    in the row of liabilities you want to show.
  3. Either mark the
    941/943 - Internal Revenue Service vendor
    checkbox to select all unpaid liabilities for that vendor or mark the checkboxes next to the specific liabilities for that vendor.
  4. When you have selected the liabilities you want to delete, select
    Delete Selected
    .

Examples: Employee Retention Credit calculation

Using the Employee Retention Credit, employers can receive a credit to their federal taxes of 50 cents for every dollar of wages (up to $10,000.00 of qualifying wages) that an employee is paid between March 13, 2020, and December 31, 2020. The maximum credit paid for an employee in this time period is $5,000.00. Likewise, employers can receive a credit to their Federal taxes of 70 cents for every dollar of wages (up to $10,000.00 of qualifying wages) that an employee is paid each quarter of 2021. The maximum credit paid for an employee each quarter of 2021 is $7,000.
Example 1
In this example, the employee is paid
$4,000.00
(all taxable by Employer FICA-SS) at the end of each quarter in 2020.
Each row in the table shows the quarter checkboxes that were marked on the COVID-19 Acts tab of the Setup > Clients screen, and the qualifying wages for each quarter based on the checkboxes that were marked.
2020 Quarters marked for credit
Qualifying wages - Q1 2020
Qualifying wages - Q2 2020
Qualifying wages - Q3 2020
Qualifying wages - Q4 2020
No quarters
$0.00
$0.00
$0.00
$0.00
Q1 only
$4,000.00
$0.00
$0.00
$0.00
Q2 only
$0.00
$4,000.00
$0.00
$0.00
Q3 only
$0.00
$0.00
$4,000.00
$0.00
Q4 only
$0.00
$0.00
$0.00
$4,000.00
Q1 & Q2
$4,000.00
$4,000.00
$0.00
$0.00
Q1, Q2, & Q3
$4,000.00
$4,000.00
$2,000.00
$0.00
Q1, Q2, & Q4
$4,000.00
$4,000.00
$0.00
$2,000.00
Q2, Q3, & Q4
$0.00
$4,000.00
$4,000.00
$2,000.00
All quarters
$4,000.00
$4,000.00
$2,000.00
$0.00
Example 2
In this example, the employee is paid
$12,000.00
(all taxable by Employer FICA-SS and Employer FICA-MED) at the end of each quarter in 2021.
Each row in the table shows the quarter checkboxes that were marked on the COVID-19 Acts tab of the Setup > Clients screen, and the qualifying wages for each quarter based on the checkboxes that were marked.
2021 Quarters marked for credit
Qualifying wages - Q1 2021
Qualifying wages - Q2 2021
Qualifying wages - Q3 2021
Qualifying wages - Q4 2021
No quarters
$0.00
$0.00
$0.00
$0.00
Q1 only
$10,000.00
$0.00
$0.00
$0.00
Q2 only
$0.00
$10,000.00
$0.00
$0.00
Q3 only
$0.00
$0.00
$10,000.00
$0.00
Q4 only
$0.00
$0.00
$0.00
$10,000.00
Q1 & Q2
$10,000.00
$10,000.00
$0.00
$0.00
Q1, Q2, & Q3
$10,000.00
$10,000.00
$10,000.00
$0.00
Q1, Q2, & Q4
$10,000.00
$10,000.00
$0.00
$10,000.00
Q2, Q3, & Q4
$0.00
$10,000.00
$10,000.00
$10,000.00
All quarters
$10,000.00
$10,000.00
$10,000.00
$10,000.00

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