AMENDMENT FOR 2020 ERTC CREDIT RESULTING IN LOSS OF QBI CREDIT

I was in the process of filing an amendment to my 2020 1040 to reflect a reduction in wage expense from the ERTC credit. I noticed that the increase in income may have caused the QBI credit to reduce from roughly $35,000 down to $416. Is the ERTC somehow tied to how the QBI is calculated or did I select an incorrect option?

Thanks

2016

Employee Tax Expert

Apr 15, 2024 8:19:09 PM

The reduction in payroll taxes (that's how ERC affects the Profit and Loss side of the financials) will increase your net income. Net income, in turn, should increase your QBI deduction (it's not a credit, but rather a deduction). What amount do you see on line 13 of your originally filed Form 1040? And what number do you see on that line once you amend the numbers to reflect the reduced payroll taxes?

There is a possibility that with the increased income you are hitting the threshold for SSBT businesses that phases out the QBI deduction. Read more about it here.

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AMENDMENT FOR 2020 ERTC CREDIT RESULTING IN LOSS OF QBI CREDIT