Do I reduce deductible wages by the amount of the ERTC

[mark381]

In early 2021 I retroactively claimed the ERTC credit for Q1/Q2 of 2020.  When I fill out the wages expense, TT tells me it should match Box 1 of the W-3.  ADP tells me that claiming the ERTC does not change the W-3.  Does that mean that I should deduct the original wages I paid, or do I still somehow need to reduce them by the amount of the ERTC?

[DianeW777]

Yes, you deduct the gross wage paid to your employees without regard to the ERTC. You may not be able to use those wages when applying for loan forgiveness. For more information use the links provided below.

• Employer Retention Credit
• Employee Return Credit under CARES Act

Continue to watch for IRS updates on the COVID relief programs.

[mark381]

I am still confused about this.  In Turbotax where I enter the expenses for wages, right underneath that is a section labeled "Enter any other work credits you claimed".  In the info for that, it says that it includes the ERC.  So I put in the amount of the ERC, and wrote "ERC credit" as the description.  On Sch C line 26, the amount of the wages is the original wages minus the ERC.  So it looks like the ERC does reduce the wage deduction.  Is all of that right?  Of course the IRS page that is supposed to answer this still hasn't been updated, 3 months later.

[redheadsrock82]

I have the same question. I entered my wages paid from From W-3 box 1. But where do I enter the Employee Retention Tax Credit I received? So that I reduce the wages paid by the credit I received. I am an LLC and file a schedule c. Thank you!

[DaveF1006]

If you are using Turbo Tax Home and Business, you can enter this directly on Schedule C line 26 under other work credits. To access Schedule C, you will need to be in the forms mode.

@redheadsrock82

[redheadsrock82]

Thank you. I knew I needed to reduce the wages paid in 2021 but I wasn't sure where to show the money I received from the ERTC.

Also, I need to amend my tax return for 2020 for the same reason, because I received the ERTC for 2020 after my 2020 taxes were done. Do I do the same when I amend my 2020 tax return, enter the ERTC I received for tax year 2020 in other work credits? Thank you again!

[PatriciaV]

Yes, handle the ERTC reporting the same on your 2020 amended return as you have for your 2021 return.

[iammeistro]

For each employee / quarter that I received the credit, would I reduce the wages paid deduction on Schedule 6 by the full $6,300 or just the portion attached to "credits" $5,742 (while the other $558 amount on IRS notice CP210 refers to a decrease in tax)?