S-Corp 1120S ERC reporting for 2020 filing ?
S-Corp 1120S ERC reporting for 2020 filing ?
S-Corp 1120S ERC reporting for 2020 filing ?
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I own an S-corp and am the only employee.
We know Covid-19 related NonRefundable portion of employee retention Credit & Refundable portion of employee retention Credit are introduced in 941 from Q2 thru Q4 of 2020.
I did not see a clear cut directions to report these in 1120S. Do we need to report these in 2020 1120S, if we received the credit?
How/where do I report NonRefundable portion of employee retention Credit received for 2020 in 1120S return ?
How/where do I report Refundable portion of employee retention Credit received for 2020 in 1120S return ?
Thanks for your guidance.
====================================
I own an S-corp and am the only employee.
We know Covid-19 related NonRefundable portion of employee retention Credit & Refundable portion of employee retention Credit are introduced in 941 from Q2 thru Q4 of 2020.
I did not see a clear cut directions to report these in 1120S. Do we need to report these in 2020 1120S, if we received the credit?
How/where do I report NonRefundable portion of employee retention Credit received for 2020 in 1120S return ?
How/where do I report Refundable portion of employee retention Credit received for 2020 in 1120S return ?
Thanks for your guidance.
Re: S-Corp 1120S ERC reporting for 2020 filing ?
The ERC credit is taken on Form 941 Payroll Tax Return. To figure out the refundable versus non-refundable, you would need to complete Form 941 Worksheet 1 for each of the quarters you are claiming the credits. Note that you may need to file an amended Form 941 for the 2020 tax year.
Re: S-Corp 1120S ERC reporting for 2020 filing ?
Thanks for weighing in.
Yes, these items are covered in 941 lines 11d and 13e.
We know the items from 941 Quarterly return find place in 1040 or 1120_S (for S-Corp). These refundable & non-refundable ERCs treatments related to 1040 or 1120_S is not clearly documented.
I open this thread to see the impact of these 941 lines 11d and 13e in 1120S return.
These credits cause a inflow (cash) to S-Corp.
How /where are we reporting this in 1120S , if 941 lines 11d and 13e NON ZERO ?
Thanks for your guidance.
Yes, these items are covered in 941 lines 11d and 13e.
We know the items from 941 Quarterly return find place in 1040 or 1120_S (for S-Corp). These refundable & non-refundable ERCs treatments related to 1040 or 1120_S is not clearly documented.
I open this thread to see the impact of these 941 lines 11d and 13e in 1120S return.
These credits cause a inflow (cash) to S-Corp.
How /where are we reporting this in 1120S , if 941 lines 11d and 13e NON ZERO ?
Thanks for your guidance.
Re: S-Corp 1120S ERC reporting for 2020 filing ?
Have you seen IRS Notice 2021-20?
https://www.irs.gov/pub/irs-drop/n-21-20.pdf
Guidance about ERC has been confusing, at one point there was some thought that owners couldn't take it, but now I believe that's limited to relatives of owners.
https://www.irs.gov/pub/irs-drop/n-21-20.pdf
But, also note Question 60 that seems to require a reduction of salary expense equal to the ERC.Question 61: Does an eligible employer receiving an employee retention credit
for qualified wages need to include any portion of the credit in income?
Answer 61: No. An employer receiving a tax credit for qualified wages, including
allocable qualified health plan expenses, does not include the credit in gross income for
federal income tax purposes. Neither the portion of the credit that reduces the
employer's applicable employment taxes, nor the refundable portion of the credit, is
included in the employer's gross income
Guidance about ERC has been confusing, at one point there was some thought that owners couldn't take it, but now I believe that's limited to relatives of owners.
Re: S-Corp 1120S ERC reporting for 2020 filing ?
Thanks for weighing in .
I did not see it . It did not show up in google search. How did you get to this ?
It is talking a lot about ERC, but as you said
1) 1120S, Employee Retention Credit Reporting
https://www.atxcommunity.com/topic/2542 ... reporting/
2) IRS Releases final 2020 Form 1120-S and Draft Instructions
https://tax.thomsonreuters.com/news/irs ... tructions/
The above says
Here is the sceanrio
I) As per IRS Notice 2021-20
1120S Line 7 = 80000 - (2000 + 2020) = 75980
II) As per the posted above link
1120S, pg 1, line 7: Reduced the owner wages by $4020 = 75980
Sch K, line 13g, code P: $4,020 (which prompts form 5884-A to open)
Form 5884-A, line 3: $4,020
Which one is correct ?
Thanks for your guidance.
I did not see it . It did not show up in google search. How did you get to this ?
It is talking a lot about ERC, but as you said
Here are the pieces showed up in my google searchGuidance about ERC has been confusing
1) 1120S, Employee Retention Credit Reporting
https://www.atxcommunity.com/topic/2542 ... reporting/
2) IRS Releases final 2020 Form 1120-S and Draft Instructions
https://tax.thomsonreuters.com/news/irs ... tructions/
The above says
This is contradicting IRS Notice 2021-20.The employee retention credit is reported on Form 1120-S on line 13g (Other Credits), using code P
Here is the sceanrio
- 1120S Line 7 Compensation of Officers = $80000
941 11d Total nonrefundable credits = $2000
941 13d Refundable portion of employee retention credit = $2020
I) As per IRS Notice 2021-20
1120S Line 7 = 80000 - (2000 + 2020) = 75980
II) As per the posted above link
1120S, pg 1, line 7: Reduced the owner wages by $4020 = 75980
Sch K, line 13g, code P: $4,020 (which prompts form 5884-A to open)
Form 5884-A, line 3: $4,020
Which one is correct ?
Thanks for your guidance.
Re: S-Corp 1120S ERC reporting for 2020 filing ?
I would go with scenario 1) per above and simply reduce the wage amount. You could also post the credit amount as an M-1 adjustment for expenses reported on books not included on tax return. Just make sure you aren't taking the credit for wages "paid" with PPP loan funds if you had one when it comes to your loan forgiveness application.
Re: S-Corp 1120S ERC reporting for 2020 filing ?
I agree with WAROB in reducing the salary and wages deduction and making the M-1 adjustment on your 1120-S.
Re: S-Corp 1120S ERC reporting for 2020 filing ?
Thanks for weighing in.
Even through I claimed refundable & non-refundable ERC in 2020 via 941, I received the ERC check only in 2021.
Do I need to report this ERC in 2020 1120S or 2021 1120S?
Do I need to consider refundable + non-refundable ERC for wage adjustment? or only refundable ERC?
Thanks for your guidance.
Even through I claimed refundable & non-refundable ERC in 2020 via 941, I received the ERC check only in 2021.
Do I need to report this ERC in 2020 1120S or 2021 1120S?
Do I need to consider refundable + non-refundable ERC for wage adjustment? or only refundable ERC?
Thanks for your guidance.
Re: S-Corp 1120S ERC reporting for 2020 filing ?
Per the IRS you need to report the wage adjustment for the year the credit is claimed regardless of if the funds were received in 2021 and you are a cash method taxpayer. The breakout of your refundable/nonrefundable credit won't require any additional reporting. The wage addback will be the amount of the entire credit received for quarters in 2020.
Re: S-Corp 1120S ERC reporting for 2020 filing ?
Thanks for weighing in.WAROB wrote: ↑Thu Apr 15, 2021 1:03 am I would go with scenario 1) per above and simply reduce the wage amount. You could also post the credit amount as an M-1 adjustment for expenses reported on books not included on tax return. Just make sure you aren't taking the credit for wages "paid" with PPP loan funds if you had one when it comes to your loan forgiveness application.
Here is the scenario
•1120S Line 7 Compensation of Officers = $80000
941 11d Total nonrefundable credits = $2000
941 13d Refundable portion of employee retention credit = $2020
I) As per IRS Notice 2021-20
1120S Line 7 = 80000 - (2000 + 2020) = 75980
For a S-Corp with no employees, the wage amount shows up as follows
W2 Box 1 = 80000
1125-E = 80000
after making ERC adjustment wage amount = 75980 for 1120S Line 7. This change will bump up 1120S Line 21 Ordinary Business Income by ERC $ (4020). There is no documenting steps in 1120S to show this adjustment.
We know 1120S Line 7 linked to 1125-E. so it will change to 75980
Now W2 Box 1 and 1125-E is not in sync.
Why are they saying in IRS Notice 2021-20, not to show ERC as other income 1120S Line 5 Other Income and call it a day?
This will be cleaner documentation. It will show the same in 1120S Line 21 Ordinary Business Income, whether we make wage adjustment by ERC or show ERC as other income.
Thanks for your guidance.