How Do I take the Employee Retention Tax Credit in Patriot?
The CARES Act allows for employers affected by COVID-19 to take an Employee Retention Tax Credit, which was 50% of up to $10,000 in wages per employee in 2020. For 2021, the tax credit is 70% of up to $10,000 per employee per quarter. Businesses qualifying for Employee Retention Credits under the Recovery Startup Business can receive up to $50,000 in tax credits.
To see if your business qualifies for this tax credit, see the IRS page FAQs: Employee Retention Credit under the CARES Act
How to Request Employee Retention Credit in Patriot
If you are a Full Service Payroll customer, you can request the Employee Retention Credit inside your payroll account. Once you have requested the credit, any payrolls you run within the credit timeframe will automatically calculate and the credit will be applied to your next quarterly federal tax return.
For more info please read, What is the Employee Retention Credit and How Does It Work for Employers?
Go to Reports > Payroll Tax Reports > Social Security Deferrals & Employee Retention Credits.
This page is used for both Social Security Payment Deferrals and Employee Retention Credits which includes the Recovery Startup Business (RSB) Credits. You may complete one or both of the sections as your business qualifies.
Answer all of the questions on the page about your business to determine whether you qualify for the Employee Retention Tax Credit.
- New for 2021: You may still take these tax credits even if you have received a PPP loan.
- If your business is not a state or local government agency, check the box.
- Indicate whether your business has over or under 500 employees. Note if your business has over 500 employees, Patriot cannot calculate the Employee Retention Tax Credit for you. However, you can calculate the credit yourself and email the dollar amount to firstname.lastname@example.org. We will update the credit amount so that it appears on your quarterly federal tax return (Form 941). For guidance on calculating the credit yourself, see the IRS page Employee Retention Credit.
- Select how you qualify for the ERC by selecting the corresponding radio button.
- Note that if you have health insurance costs you want to include, email email@example.com the dollar amount of health insurance costs and we will update your account so that it appears on your Form 941. See this IRS page for guidance.
- If your business has been affected by COVID-19 as defined on the form, check the box.
- Enter the Start Date your business was affected. The start date must be on or after January 1, 2021. Effective 3/31/21, Patriot will no longer accommodate credits taken prior to January 1, 2021.
- If your business qualifies for Employee Retention Credits under the Recovery Startup Business, you will not be able to select a start date before 7/1/2021.
- Enter the End Date your business resumed operations. You can leave this blank and enter this date later if needed. The end date must be on or before 12/31/2021.
- Select your owners and employees related to the owners. These employees are ineligible for this tax credit.
- Check the box at the bottom of the page to opt into the Employee Retention Tax Credits Program.
Once you qualify, click the “Submit” button. The total estimated tax credit amount will be shown. Any future payrolls you run that are dated within your start and end dates will calculate a tax credit, and will be available to request a refund.
How to Stop Employee Retention Credits
Besides an employee hitting the maximum wage limit for ERCs ($10,000 per employee per quarter in 2021 and $50,000 per quarter for the RBS), there are also instances when your business becomes ineligible for the Employee Retention Credit (ERC). You are no longer eligible for ERC if:
- Your business has fully reopened
- Your gross receipts recovered back to 80% or more when compared to the same quarter last year
If you reach your credit limit for the ERC of $10,000 or $50,000 in total credits for the RBS per quarter, the software will automatically stop calculating credits.
Select an end date for ERCs (and Social Security Deferrals) by going to Reports > Payroll Tax Reports > Social Security and Employee Retention Credits.
Simply select the date you want the Employee Retention Credits to stop. The end date must be later than the last payroll you ran taking the credits.
If you inadvertently select the wrong date to stop Employee Retention Credits, please contact support.
Keeping Track of Employee Retention Credits
You can view all ERCs (Employee Retention Credits) that you have used and what is remaining in the Payroll Tax Credit Report.
Reports> Payroll Tax Filings > Payroll Tax Credit Report
Read more on how to use the Payroll Tax Credit Report on our help article.