I have a client who sold his business assets in an S corporation in 2021 and ceased doing business. He has kept his corporation open. In 2022 he applied for and his corporation received a substantial payout from the IRS related to the Employee Retention Credit.
the ERC is not taxable, however, does reduce the payroll tax expense and wages expense for the year that the credit applies. In this case, the credit applies to 2021.
Is there a requirement to amend the 1120S for the 2021 tax year and reduce the wage and taxes expense? This results in taxable income to the shareholders.
Can the ERC be recognized as other income in 2022, the year received, and pass the income tax effect in that way?