Employee Retention Credit

The IRS has been taking 20-24 weeks to send out the checks.

It is not. The client will need to file an amended return for applicable tax years affected to offset the wage deduction by the amount declared as a credit.

The ERC will be a reduction on payroll expenses for the year they were claimed. A copy of the guidance is listed below for their CPA to review. We are happy to assist if they have any questions.

IRS Guidance:

Guidance for reduction in payroll expenses due to ERC.
https://www.irs.gov/pub/irs-drop/n-21-20.pdf

F. Other Rules Related to the Employee Retention Credit
Section 2301(e) of the CARES Act provides that rules similar to section 280C(a) of the Code apply for purposes of the employee retention credit. Section 280C(a) of the Code generally disallows a deduction for the portion of wages or salaries paid or incurred equal to the sum of certain credits determined for the taxable year.

Accordingly, a similar deduction disallowance applies under section 2301(e) of the CARES Act with regard to the employee retention credit, such that an employer's deduction for qualified wages, including qualified health plan expenses, is reduced by the amount of the employee retention credit.

https://www.irs.gov/pub/irs-drop/n-21-49.pdf

C. Timing of Qualified Wages Deduction Disallowance
Section 2301(e) of the CARES Act, as explained in section III.L. of Notice 2021-20, and section 3134(e) of the Code provide the general rule that an employer's deduction for qualified wages, including qualified health plan expenses, is reduced by the amount of the employee retention credit. The Treasury Department and the IRS have been asked about the timing of the reduction, specifically in the circumstance in which a taxpayer files an adjusted employment tax return to claim the employee retention credit for prior calendar quarters and has already filed a federal income tax return for the tax year in which the credit is claimed on the adjusted return.

Under section III.L. of Notice 2021-20, a reduction in the amount of the deduction allowed for qualified wages, including qualified health plan expenses, caused by receipt of the employee retention credit occurs for the tax year in which the qualified wages were paid or incurred. When a taxpayer claims the employee retention credit because of the retroactive amendment of section 2301 of the CARES Act by section 206(c) of the Relief Act (relating to eligibility of PPP borrowers to claim the employee retention credit) or otherwise files an adjusted employment tax return to claim the employee retention credit, the taxpayer should file an amended federal income tax return or administrative adjustment request (AAR), if applicable, for the taxable year in which the qualified wages were paid or incurred to correct any overstated deduction taken with respect to those same wages on the original federal tax return. Section 2301(e) generally provides, in relevant part, that rules similar to the rules of section 280C(a) of the Code shall apply. Section 280C(a) requires tracing to the specific wages generating the applicable credit. See, generally, Treas. Reg. § 1.280C-1. To satisfy this tracing requirement, the taxpayer must file an amended return or AAR, as applicable.

The employee threshold to file for ERC in 2020 is 100 full time employees or less in 2019. The threshold to file for ERC in 2021 is 500 full time employees or less in 2019. The term "full-time employee" means an employee who, with respect to any calendar month in 2019, had an average of at least 30 hours of service per week or 130 hours of service in the month (130 hours of service in a month is treated as the monthly equivalent of at least 30 hours of service per week), as determined in accordance with section 4980H of the Internal Revenue Code. An employer that operated its business for the entire 2019 calendar year determines the number of its full-time employees by taking the sum of the number of full-time employees in each calendar month in 2019 and dividing that number by 12.

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-determining-qualified-wages-faqs

The IRS allows companies to file an amended payroll tax return (941-X) for up to three years after the filings were due. All of 2020 payroll taxes were deemed due on April 15th of 2021. All of 2021 payroll taxes were deemed due on April 15th of 2022.

Therefore 2020 filings must be postmarked by April 15, 2024 and the 2021 filings must be postmarked by April 15th, 2025.

First, you need to confirm what kind of sale it was. If it was a full stock sale, new owner has rights to ERC filing and money. If it was an asset sale, then previous owner has rights to filing and ERC money for the quarters he was the owner.