Timing of 2021 Employment Retention Credit

Technical topics regarding tax preparation.
#1
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We know that the ERC should decrease amount of expenses reported on the tax return. If the study/computation can't be completed by 9/15 for 2021, what options do we have? Can we amend the 2021 Form 941s, and just report the refund as income in 2022/2023?
 

#2
MilesR  
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Other than late filing and taking the penalty, I'd think file with a best guess on the credit amount and then amend it as soon as the credit is determined. I would think that could be done by Oct 15th. Tell the shareholders not to file until they get the amended K-1's.

The IRS notice says report the credit on the tax return that corresponds with the wages so reporting it as income/reduction in wages in 2022 would technically be incorrect.
Last edited by MilesR on 17-Aug-2022 1:18pm, edited 1 time in total.
 

#3
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It's more so that we need the return done now and K-1s issued.

One entity is a partnership, and the other is S-corp.

If we do it at a later time, are we required to amend the returns to reduce wages?
 

#4
MilesR  
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Technically yes, the return "should" be amended to include the credit as a reduction in wages. If you claim it in the "wrong" year (aka the year received) there's still the possibility the IRS looks at 2021 and says it should have been reported in 2021 and adjusts and assesses that year, and then you have the issue of it also being reported in 2022 and have to amend that year to remove it.
 

#5
sjrcpa  
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If it's a BBA partnership, you won't be able to amend it. You'll need to do an Administrative Adjustment Request.
 

#6
Wiles  
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sjrcpa wrote:If it's a BBA partnership, you won't be able to amend it. You'll need to do an Administrative Adjustment Request.

Oh yeah. I hate stupid rules.
 

#7
jon  
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I just received a LLC filing as a partnership for 2021. The owners do not draw salaries and on 6/9/22 PAYCHEX amended all the quarters in 2020 and 2021 that the ERC applied for. The sister-in-law(corporate tax attorney) of the main owner said she did not think the 2020 and the 2021 should apply the ERC for those specific years because they are cash basis.

I told her about the notice, still waiting to hear back from her.
 

#8
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jon wrote: The sister-in-law(corporate tax attorney) of the main owner said she did not think the 2020 and the 2021 should apply the ERC for those specific years because they are cash basis.

I told her about the notice, still waiting to hear back from her.


She's wrong. Tell her Sec 51(c) is real clear about the timing of this recognition. You reduce the wage deduction in the year to which the credit applies.

The one big exception to this is for a BBA partnership. Because the item to change was discovered/determined in 2022, this would be an item that the partner(s) will be given information for with the 2022 K-1. The partners have to amend their return, but the partnership doesn't. There has already been much discussion regarding relief available for penalties/interest related to ERC amendments to prior years.
~Captcook
 

#9
Wiles  
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CaptCook wrote:The one big exception to this is for a BBA partnership. Because the item to change was discovered/determined in 2022, this would be an item that the partner(s) will be given information for with the 2022 K-1. The partners have to amend their return, but the partnership doesn't.

This is interesting and new to me. Does the partnership do the AAR?

Is there a particular form that is given with the 2022 K-1 or is it just a letter telling them to amend their 2020 & 2021 tax returns and claim $X?
 

#10
sjrcpa  
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Yes the partnership (technically the Partnership Representative) does the AAR and provides the info to the partners. Form 8082
Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR) is used, and 8985 or 8986.
 

#11
Wiles  
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Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR) is used, and 8985 or 8986.'

Or? Flip a coin?
 

#12
sjrcpa  
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Like most tax things It Depends.
"Form 8985 is used to summarize and
transmit Forms 8986, Partner's Share of
Adjustment(s) to Partnership-Related
Item(s), by an audited partnership,
administrative adjustment request (AAR)
partnership, or pass-through partner.
Form 8985 is also used to report payment
made and related calculations by a
pass-through partner."
 

#13
Wiles  
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Thank you. All partners are individuals. So I will do the 8985 and the 8978. Why doesn't Lacerte have these forms????
 

#14
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Wiles wrote:Thank you. All partners are individuals. So I will do the 8985 and the 8978. Why doesn't Lacerte have these forms????


That's good to know
I have one to do myself that I haven't dug into yet.
Thanks for asking this question
~Captcook
 

#15
Wiles  
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I wonder what's the penalty for filing an amended 1065 on paper when you should have done all this AAR nonsense, instead?

... Still include the Form 8082 with the push out election, but no 8985 & 8978.
 


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