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:
You can enter the interest by clicking the following:
Thanks! Forgot to add that the interest amount was reported on a letter from the IRS not a 1099 INT form. Would the same apply?
Yes, enter the amount received as if it was reported on a 1099-INT.
Enter interest from the IRS like a 1099Int and put the amount in box 1. Enter it manually and just enter IRS for the payer. Don't enter any other info like the address or a EIN.
Enter a 1099-Int under
Federal on left
Wages & Income
Interest and Dividends
Interest on 1099INT - Click the Start or Revisit button
All great info! My final question is regarding the ERTC credit. The credit received should be deducted from the total employee wages that I have paid for that tax year correct? My understanding is that as a result of receiving the credit the deduction for wages is reduced as a result. Thanks.
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:
Thank you. I received the credit for 2020 and 2021 so I assume those would be the years I would need to reduce and amend correct? Can I amend using Turbo Tax for those years?
Yes, you can use TurboTax and based on the IRS answer you should amend the years the credit pertains to. If you have a balance due be prepared for a penalty and interest. If this occurs, you may be able to request abatement at that time. Be sure to explain on your amendment the reason you are amending in detail.
Be sure to read all the instructions carefully, before you begin, so that TurboTax knows the original numbers and the changed numbers for your amendment.
HI,
I amended our 2020 taxes through Turbotax which resulted in a higher tax due. My question is that the amount due does not seem to take into account the taxes I already paid for the year 2020. Does the software takes into account my prior payment or is it giving me a balance due assuming I did not pay?
Thanks
If you completed Form 1040X following the steps provided in TurboTax, it should account for payments made.
Form 1040-X contains three columns:
In Part III of Form 1040-X, you'll need to provide a clear explanation for your reasons for filing an amended return.
See this tax tips article for more information.
The lower part of the form, starting with Line 16, reconciles the changes made and any additional payments made. If you owe an additional amount based on the changes, it will appear on Line 20 of Form 1040X. If you have overpaid your tax, based on the changes, the overpayment will appear on Line 21 of Form 1040X.