Question

Where do you record the ERC on the 1120S?

Forum|Forum|4 years ago
February 23, 2022
3 replies
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I use TurboTax for business, S-Corp/1120S, and I expected the software to ask if the company received any Employee Retention Credits, and it didn't, ugh!

No where does the software even mention the ERC, and I imagine a lot of businesses received it . . . so, where should it be recorded on the 1120S? Do you simply subtract the credits from total wages - under the "Salaries and Wages Paid" section of deductions? My concern here is that the wages reported will be a lot less than the wages reported on the company W-3. I just thought there would be a specific place to record the credit.

Help!

TurboTax Business Windows

A

Anonymous_

Perhaps the following thread will help.

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/employee-retention-credit-where-to-enter-1120-s/00/163065

PatriciaV

No, you should not reduce wages, as the Employee Retention Tax Credit (ERTC) reduces payroll tax payments (not wages). The wages you report on Form 1120S Lines 7 & 8 should match your W-3.

Further, the ERTC was actually claimed on the company's Form 941 quarterly payroll tax reports as a credit for employer taxes. You should report the actual taxes paid during the tax year on Line 12, which should match your 941's for the year.

The credit taken is reported to the shareholders on Schedule K1, Line 13g (Code P Other Credits).

For more info, see Reporting CARES Act Employee Retention Credit on Form 1120-S

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T

toddcrabAuthor

Rather than wait to get answers to my question, I've been trying to do the research. The link you provided me referenced an article from 2020 - and a lot of guidance has been issued since then. The 941 is used to get the credit, and my company received large ERC refund checks because of those 941's, but my understanding is when it comes to filing income taxes (not payroll taxes via the 941), those credits need to be accounted for on the 1120S. The instructions for the 2021 1120S has this excerpt; so according to this, my thinking is that I reduce the amount of wages by the amount of ERC received via the employment tax returns (for me, that's the 941's). Does this sound correct to everyone?

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ThomasM125

Another question. When I amend my 2021 - 1120-S it will change my balance sheet totals. Will I also have to amend my 2022 - 1120S for the balance sheet or can I just move on to 2023?

You can just move on to the 2023 return since your income in 2022 won't change. @ cowgirlholley

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L

LARU

I can add some information that I have copied from the 1120s Instructions:

Line 12. Taxes and Licenses

Do not reduce your deduction for social security and Medicare taxes by the following amounts claimed on the corporation's employment tax returns: (1) the nonrefundable and refundable portions of the employee retention credit, and (2) the nonrefundable and refundable portions of the FFCRA credits for qualified sick and family leave wages. Instead, item (1) reduces your deduction for wages on lines 7 and 8, and item (2) must be reported as income on line 5.