The Employee Retention Credit (ERC) is a refundable payroll tax credit available for businesses that continued to pay employees while suspended by COVID-19-related governmental orders or had significant declines in gross receipts in 2020 and 2021. Employers may be eligible to claim the credit based on “qualified wages” paid between March 13, 2020, and Dec. 31, 2021.
To claim the ERC, an eligible employer will likely file an amended payroll tax return due within three years of the original filing deadline for an applicable quarter. However, the date that payroll tax returns are considered as filed differs from the actual date of filing.
Timely filed quarterly payroll tax returns are considered filed on the 15th day of the fourth month in the year following a given quarter. This means that an amended payroll tax return to claim the ERC for any calendar quarter in 2020 must be filed by April 15, 2024. For calendar quarters in 2021, the amendment must be filed by April 15, 2025.
FILING DEADLINES FOR ERC CLAIMS:
- For Q1-4 2020, ERC claims must be filed by April 15, 2024
- For Q1-4 2021, ERC claims must be filed by April 15, 2025
Generally, claims filed within three years of the deemed filing date are subject to the statute of limitations for IRS assessment for the same period. Therefore, ERC claims for all 2020 calendar quarters can be audited through April 15, 2024. ERC claims for the first two quarters in 2021 can be audited through April 15, 2025.
However, for the last two calendar quarters of 2021, the IRS extended the statute of limitations by an additional two years. This extends the period that the IRS can audit ERC claims for the third and fourth calendar quarters of 2021 through April 15, 2027.
AUDIT ASSESSMENT PERIOD FOR ERC CLAIMS:
- For Q1-4 2020, the three-year statute ends April 15, 2024
- For Q1-2 2021, the three-year statute ends April 15, 2025
- For Q3-4 2021, the five-year statute ends April 15, 2027
The Employee Retention Credit and related income tax compliance is complex and nuanced. If you have any questions about the ERC or its impact on you or your business, please contact the Tax Services Team at GHJ.
