How to show ERC fund adjustment in modified 1120S and then how to modify 1040

[ombgupta]

I need to report ERC funding for year 2021. Please suggest how to show it in modified 1120S and then where to carry it to adjust the modified 1040 tax return for 2021 so there is no penalty or interest

[jashley]

When a business receives an Employee Retention Credit for a prior year, the prior year tax return(s) must be amended.  The 1120S will be amended by increasing the salary and wage deduction on Line 8.  Any interest included in the credit will be report on Line 5.  Of course, the amended 1120S will produce amended K-1 forms for each shareholder at which time the shareholder will need to amend the 1040.

When the shareholder amends the 1040, if additional tax is due then that tax must be paid as soon as possible.  However, the IRS has announced that there is relief from interest and penalties if there is reasonable cause.

https://www.irs.gov/newsroom/irs-reminds-employers-of-penalty-relief-related-to-claims-for-the-emplo...