We moved!

Help articles have been migrated to the new Help and Support. You can find help for your products and accounts, discover FAQs, explore training, and contact us!

The Infrastructure Investment and Jobs Act, signed into law by President Biden on November 15, 2021, retroactively terminated the Employee Retention Credit for non-Recovery Start-up Businesses as of October 1, 2021. We recommend data entry be reviewed based on the latest IRS guidance issued in Notice 2021-65.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, Consolidated Appropriations Act of 2020, and American Rescue Plan Act of 2021 provide payroll tax relief for employers by providing an Employee Retention Credit. 

Using the Employee Retention Credit, in 2020 employers can receive a credit to their federal taxes of 50 cents for every dollar of wages (up to $10,000.00 of qualifying wages) that an employee is paid between March 13, 2020, and December 31, 2020. The maximum credit paid for an employee is $5,000.00 for the year.

In 2021, employers can receive a credit to their federal taxes of 70 cents for every dollar of wages (up to $10,000.00 of qualifying wages) that an employee is paid, per quarter, through September 30, 2021 (or December 31, 2021 if the business is a Recovery Start-up business). The maximum credit paid for an employee is $7,000.00 per quarter.

For detailed information about this credit, see the IRS Employee Retention Credit FAQs

Thomson Reuters Labs designed an interactive Employee Retention Credit Eligibility Tool to help you determine if a business qualifies for the Employee Retention Credit.

Clients that have 500 or fewer employees

For payroll checks between March 13, 2020 and June 30, 2021, Accounting CS uses employer FICA-SS taxable wages as the basis for qualifying wages, regarding this credit, and can generate an Employee Retention Credit liability adjustment for all employee payroll checks that are entered in the quarters that you specify. For payroll checks between July 1, 2021 and December 31, 2021, Accounting CS uses employer FICA-Med taxable wages as the basis for qualifying wages. If a particular employee should be excluded from the Employee Retention Credit calculation, mark the Exclude from Employee Retention Credit checkbox in Setup > Employees > Payroll Taxes tab > COVID-19 Settings.

Automatically creating liability adjustments for the Employee Retention Credit

Use this method to automatically create liability adjustments for employees who are eligible to claim the Employee Retention Credit.

1. Choose Setup > Clients and select the client that is claiming the credit.
2. Click the COVID-19 Acts tab.
3. Mark the checkboxes for the quarters in which the client is claiming the credit and then save the client record.
4. When you process payroll for the client, Accounting CS makes the liability adjustments automatically.
5. Run the Employee Retention Credit Summary report (available from the Accounting CS Library) to verify the amounts.

Manually creating liability adjustments for the Employee Retention Credit

Use this method to manually create liability adjustments for payroll checks created before you turned on the Employee Retention Credit.

1. To determine the appropriate credit amount, run the Employee Retention Credit Summary report, available from the Accounting CS Library.
2. Choose Actions > Manage Payroll Liabilities.
3. Click the Add Liability button.
4. Select 941/943 - Internal Revenue Service in the Vendor field.
5. Select FIT Employee Retention Tax Adj in the Item field.
6. Enter notes in the Notes field (optional).
7. Enter the transaction date. This should match the payroll check date in which the employee wages were included.
8. In the Amount field, enter a negative amount matching the wages eligible for the credit.
9. Click OK. 

Clients with 501 or more employees

For these clients, taxable wages that qualify for the Employee Retention Credit are wages paid to employees who are not performing services between March 13, 2020, and December 31, 2020 (for 2020) or during 2021. 

DO NOT mark the quarter checkboxes in the COVID-19 Acts tab of the Setup > Clients screen for these clients. This will create liability adjustments for all of the employees' hours, causing incorrect calculations. If this happens, you will need to either delete the liability adjustment, or manually override the 941 quarterly reports with the correct values for the Employee Retention Credit.

Manually creating liability adjustments for the Employee Retention Credit

1. Determine the appropriate credit amount. This will vary by client, but if you created a new pay item to use for employees not performing services you might run a report such as the Wage Register report, filtered down to the appropriate employees or pay items.
2. Choose Actions > Manage Payroll Liabilities.
3. Click the Add Liability button.
4. Select 941/943 - Internal Revenue Service in the Vendor field.
5. Select FIT Employee Retention Tax Adj in the Item field.
6. Enter notes in the Notes field (optional).
7. Enter the transaction date. This should match the payroll check date in which the employee wages were included.
8. In the Amount field, enter a negative amount matching the wage amount paid for the hours the employees weren't working.
9. Click OK. 

Deleting an Employee Retention Credit liability adjustment

Follow these steps if you need to delete an Employee Retention Credit liability adjustment.

1. Choose Actions > Manage Payroll Liabilities.
2. Expand the liabilities in the grid by clicking the plus sign in the appropriate row of the grid.
3. Mark the checkbox next to the 941/943 - Internal Revenue Service vendor to select all unpaid liabilities for that vendor OR mark the checkboxes next to the specific liabilities for that vendor.
4. When you have selected the liabilities you want to delete, click the Delete Selected button.

Examples: Employee Retention Credit calculation

Using the Employee Retention Credit, employers can receive a credit to their federal taxes of 50 cents for every dollar of wages (up to $10,000.00 of qualifying wages) that an employee is paid between March 13, 2020, and December 31, 2020. The maximum credit paid for an employee in this time period is $5,000.00. Likewise, employers can receive a credit to their Federal taxes of 70 cents for every dollar of wages (up to $10,000.00 of qualifying wages) that an employee is paid each quarter of 2021. The maximum credit paid for an employee each quarter of 2021 is $7,000.

Was this article helpful?

Yes No

Submit