Reporting Employee Retention Credit on Form 990

Learn how to report employee retention credit on Form 990, including information about paid vacation credits, Work Opportunity Tax Credit, and more.

Reporting Employee Retention Credit on Form 990

Filing Form 990 requires organizations to follow the book report. The IRS has recently updated their frequently asked questions about paid vacation credits available to employers, such as the leave granted to employees in connection with COVID-19 vaccines. This notice confirms that ERC credits must be reflected in the tax return for the year in which the salaries were paid. The amended “Build Back Better” Act would exclude the previous proposal on income tax on investments from educational institutions, while maintaining the credit for research infrastructure.

The IRS also updates information on the Work Opportunity Tax Credit (WOTC) pre-selection and certification process for certain tax-exempt organizations that hire veterans. Furthermore, the tip credit available for income tax purposes can be requested together with the ERC with the same salary. The Notice does not address this point, but since Form 990 is filed using the same accounting method as the organization's books and records, grant income will be reported in the same fiscal year in which the credit is reported in the organization's financial statements. The rules related to ERC and other labor credits refer to the rules for constructive attribution of property in Section 267 (c), which are quite broad.

Organizations should take into account all of these factors when filing Form 990 and reporting employee retention credits.

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