Accounting, Bookkeeping, Invoicing Blog Posts | Page 3

The amount of the R&D tax credit varies by a number of factors. Generally, a business should expect to receive 7% to 10% of qualified research and development expenses to be used toward federal tax liability.

You can get an EIN immediately by applying online via the IRS’s website. All other application methods have a waiting period of at least four business days after applying.

Unfortunately, there is no way to expedite the ERC refund process. You can avoid potential delays by ensuring that your Form 941-X is filled in correctly, including ERC refund calculations. You may also reach out to reputable ERC funding companies to learn about ERC advances and funding programs, although fees will apply.

The employee retention tax credit, or ERC, is a real tax credit available to qualified small business owners. This refundable tax credit could be filed on quarterly returns in 2020 and 2021. Small business owners that didn’t know about this credit can retroactively receive a refund by filing amended tax returns.

During an IRS audit, the IRS will notify you of the specific information you need to submit. However, some common documentation that you may be required to submit include payroll records, accounting records, PPP loan forgiveness documentation, and documentation that shows your business was fully or partially shut down by the government or proof of a decline in receipts.

Any small business that experienced fully or partially suspended operations due to COVID-19 or a significant decline in gross receipts qualifies for the ERC. 

Qualified wages are wages that will be under consideration when you apply for the ERC. They are wages paid between March 15th, 2020 and September 30th, 2021. The period for qualified wages does extend beyond the September deadline for certain businesses.

If you didn’t take advantage of the Employee Retention Tax Credit during the COVID-19 pandemic, eligible small businesses can now retroactively claim the credit by filing an amended tax return via IRS Form 941-X.

Yes, it is possible to receive the employee retention credit even if you’ve received a PPP loan. However, you can’t claim the ERC for any portion of wages used to qualify for the PPP loan or PPP loan forgiveness.

How you record the ERC as a journal entry depends on when you claimed the credit and if you received it as a refund. You can record the transaction by debiting the Income Tax Expense account and crediting the Cash account if you claimed the ERC on your quarterly return. If you filed an amended return to receive a refund, you will record a debit in your Cash account and a debit under the Income Tax Expense account.