Accounting for Employee Retention Credit in QuickBooks

The Employee Retention Credit (ERC) is a positive step taken by the government to help employers during the coronavirus pandemic. Learn how to record it in QuickBooks.

Accounting for Employee Retention Credit in QuickBooks

The Employee Retention Credit (ERC) is a positive step taken by the government to help employers during the coronavirus pandemic. It is a fully refundable tax credit that is equivalent to 50% of qualifying salaries and the allowable expenses of the qualified health plan. Business owners who are struggling to make ends meet during this crisis may find this tax credit easier to access than other popular aid options, such as loans and grants. To record the ERC in QuickBooks, you need to follow a few steps. Go to the Payroll menu and select Employee.

For regular hours, enter the regular employee retention credit. For any overtime, enter the employee retention credit in the Overtime field. If applicable, enter the employer's health insurance premium. The ERC is recorded as a cash debit or accounts receivable and as a credit to income from contributions or grants. If an organization receives advance payments from the ERC, cash will be charged and a refundable advance obligation will be credited. You can apply for this credit quarterly, so check here to calculate the amount of your credit for the next calendar quarter.

Enter the qualifying salaries paid to all employees during the period of their total or partial suspension from operations, or during the quarter in which they experienced a qualifying decline in their gross income. No documentation is required to support your request for the employee retention credit. However, there is a provision of federal law that allows employers to file an amended return up to three years after a tax period. We hope that these considerations will help you determine how to account for ERC in your organization and reflect credit in your reports.

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