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What Is The Employee Retention Tax Credit?

    Erica Seppala
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Erica Seppala

Erica Seppala

Expert Analyst & Reviewer at Merchant Maverick
An expert in accounting, finance, and point of sale, Erica has been researching and writing about all things small-business since 2018. Erica's insights into personal and business finance have been cited in numerous publications, including MSN, Real Simple, and Reader's Digest. She is a graduate of Limestone College.
Erica Seppala
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Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Benjamin Lee

    So that the readers of this article are too excited reading that the ERTC is not taxable, which is true per the IRS website, but they need to reduce the business expenses by the credit received.

    Per the IRS website re the Convid 19 FAQs stated below:

    Special Issues for Employers: Income and Deduction
    85. Does the Employee Retention Credit reduce the expenses that an Eligible Employer could otherwise deduct on its federal income tax return?

    Yes. Section 2301(e) of the CARES Act provides that rules similar to section 280C(a) of the Internal Revenue Code (the “Code”) shall apply for purposes of applying the Employee Retention Credit. Section 280C(a) of the Code generally disallows a deduction for the portion of wages paid equal to the sum of certain credits determined for the taxable year. Accordingly, a similar deduction disallowance would apply under the Employee Retention Credit, such that an employer’s aggregate deductions would be reduced by the amount of the credit as result of this disallowance rule.

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