Yes, you have to amend the year that you receive the credit for, so in your case that is 2020.
You do that by reducing your wage deduction by the amount of the credit. If you need more specific guidance, respond back with the type of business return you are filing.
Thank you for the information. I am filing a Schedule C since I own a single member LLC that is taxed as a sole proprietorship. Where would the refund be entered on Schedule C?
When you amend the tax return for the year you received the credit, it is an offset to Salaries & Wages. Basically, you subtract the ERC from your total wages. You can either enter the total manually or (in TurboTax Desktop) add Supporting Details (right click the entry box) and let TurboTax do the math for you.
In TurboTax Desktop, wages appear under All Other Expenses under Business Expenses for Schedule C. In TurboTax Online, this expense is called Employee wages and you must have checked the box for W-2 wages under your business summary.