HOW TO ENTER INTEREST PAID FROM THE IRS ERTC CREDIT

[MARK2025]

How do you enter the interest paid by the IRS on funds received from the ERTC credit? 

[Vanessa A]

You can enter the interest by clicking the following:

1. Federal
2. Income
3. Show more next to Interest and Dividends
4. Start next to interest on 1099-INT

[MARK2025]

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?

[MayaD]

Yes, enter the amount received as if it was reported on a 1099-INT. 

[VolvoGirl]

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

[MARK2025]

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.

[DianeW777 · Accepted solution]

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).
  • Question 7 - IRS ERC FAQs

@MARK2025 

[MARK2025]

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?

[DianeW777]

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.

• Accessing a prior-year return
• Get My IRS Transcript (available if you need it)

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.

• How to amend (change or correct) a return already filed?
• What is the deadline for filing an amended return?  (For 2020, the deadline is April 15, 2024 should a refund be possible)
• How to file an amended return with the IRS

@MARK2025 

[MARK2025]

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 

[MonikaK1]

If you completed Form 1040X following the steps provided in TurboTax, it should account for payments made.

Form 1040-X contains three columns:

• Column A. This column shows the numbers previously reported on your tax return. Use the copy of your tax return you gathered in Step 1 to complete this column.
• Column B. This column shows how the amounts from your original return need to increase or decrease. For example, if you're amending your gross income to include $50 of interest income missing from your previously filed tax return, you would enter $50 on line 1, column B.
• Column C. This column shows the correct amount. Just add the amounts from column A and column B and enter the result here.

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.