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2020 ERC - Amend or Not

Technical topics regarding tax preparation.
#1
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I have heard of several CPE instructors (through participants) that are saying that they do not think it is necessary to go back and amend ERC 941's if they were prepared prior to Notice 2021-49 coming out. For example, if I prepared a 941X in order to take the ERC for a quarter in 2020 and received a credit for a shareholder with a living relative (prior to issuance of the notice), it is not necessary to amend and pay back the money related to the credit for the shareholder wages.

Anyone know what they are basing this on? Anyone on here not amending?
 

#2
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I've heard that when the tax law is unclear, you can file based on a favorable interpretation of the law, without needing to amend when a clarification comes out later. But everything filed after the clarification is released has to follow that new rule, of course. (Think of all the court cases that settle an issue that's been unclear for years, and we don't go back and amend anything, we just start applying the ruling going forward.)

Of course, the issue of whether the tax law was originally unclear on this point has been debated. But I sure didn't realize at first that living relatives would cause a problem.

In any case, we haven't amended any 941's for this.
 

#3
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Thanks for the reply Beardenjv. I personally think the law was unclear on this - just look at how many people filed incorrectly based on the IRS position on this.

So if clients choose not to amend, what is the statute on this? Is it three or five years from the date of filing the 941X? Would worst case scenario be they have to pay back the money plus interest? Or would there be some sort of penalty involved?
 

#4
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Seaside CPA wrote:So if clients choose not to amend, what is the statute on this? Is it three or five years from the date of filing the 941X?

Yes. If I remember correctly, I believe the 5-year statute was added only for the last round of ERC expansions, i.e., for Q3 & Q4 2021. I think the 3-year statute would apply to the other quarters (same statute as a regular 941).

Seaside CPA wrote:Would worst case scenario be they have to pay back the money plus interest? Or would there be some sort of penalty involved?

Right - tax, interest, and late payment penalty.

Of course, you have to be consistent and reduce your wage deduction on the income tax return if you don't amend the 941 - and you also should be able to claim the full wage deduction on the income tax return if you do amend the 941 to get rid of the credit.
 


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