Yes. The amount of your ERC reduces the amount that you are allowed to report as wage expense on your income tax return for the tax year in which the qualified wages were paid or incurred.
Generally, most taxpayers claim wage expense as a deduction on their income tax returns. However, for some taxpayers, wage expense is properly capitalized to the basis of a particular asset or as an inventory cost.
You should amend your income tax return to reduce the amount of your original wage expense if that adjustment has not yet been made by:
- reducing the prior wage deduction, or
- reducing the prior amount capitalized (and making any resulting adjustment, such as reducing a depreciation deduction).
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