How to apply Employee Retention Credit

Hi there, HMBabies.

Thank you for posting here in QuickBooks Community. I'll be sharing information about Employee Retention Credit in QuickBooks Online and how it works.

The CARES Act has two important components for eligible employers: an Employee Retention Credit and a deferral of the employer share of 2020 Social Security taxes. If you continue to operate and pay employees during 2020, you may be eligible for one or both of these benefits.

I suggest checking the guidelines for ERC or checking with IRS on who's eligible for this credit. This way, you'll also know how to apply the said ERC. This is because when setting up the Employee Retention Credit in your payroll, you need to make sure you qualify for the credit. The size of your workforce, the structure of your business, and the reason why your business may or may not be closed all affect whether you can take this credit.

Once you've concluded you are eligible to accept the credit, you'll have to first set up your payroll to accept and track the credit. Since the Employee Retention Tax Credit covers regular time, overtime, and company contributions to health care, you’ll need to set each of these items in your payroll. Please know that with the passing of the Infrastructure Investment and Jobs Act in November 2021, the Employee Retention Credit (ERC) retroactively expired on September 30, 2021. 

This means the ERC can’t be used on paychecks dated on or after October 1, 2021. Also, credits can’t be taken on any tax payments on or after October 1. We help you understand what to do if you did take credits after October 1. You can click on this article to see the additional details. Understand the recent expiration of the Employee Retention Credit.

Lastly, you may refer to this article to see further details about the ERC and deferral of the employer share of Social Security taxes for 2020 as outlined in the CARES Act: How the Coronavirus Aid, Relief, and Economic Security (CARES) Act affects your payroll.

Please know that you're always welcome to post here in the Community if you have any clarifications or other concerns about Employee Retention Credit. Just click the Reply button and add a comment. I’ll jump right back in to assist further. Have a good one.