1120S, Employee Retention Credit Reporting

[G2R]

Wow, this tax season feel like college.  I have to learn something new every week!

1120S, 2 owners.  Both on payroll, no other employees.  They filed for the ERC in Q3 for $5000.  I just want to confirm I'm reporting this credit accurately. 

• 1120S, pg 1, line 7:  Reduced the owner wages by $5k.
• Sch K, line 13g, code P: $5,000 (which prompts form 5884-A to open)
• Form 5884-A, line 3: $5,000

Does this look right?

What I really hate about this approach is that the 1120S wages won't match the W-3.   But I guess that's what the 5884 reconciles out.  Also, if the IRS uses line 7 as a trigger for unreasonable compensation, this might trip it.  

[Lee B]

You need to look at Monday's thread about this under the COVID 19 SECTION

[G2R]

28 minutes ago, cbslee said:

You need to look at Monday's thread about this under the COVID 19 SECTION

I assume you mean this one.... If so, this yes I had read that already. Your IRS FAQs you posted match the above approach.  

Still looking to see if others preparers that file 1120S are handling this on their returns the same way.  

 

[Mike P.]

From what I understand this is not a Income Tax Credit reported on a K-1. It is a credit on 941 Taxes. So it does not go as a Code P on Schedule K

Line 13g code P specifically states: "Other credits (code P). Attach a statement to Form 1120-S that identifies the type and amount of any other credits not reported elsewhere."

rom the 1120S instructions:

"If the corporation claims a credit for any wages paid or incurred, it may need to reduce the amounts on lines 7 and 8. See Reducing certain expenses for which credits are allowable, earlier. Also reduce the amounts reported on lines 7 and 8 by the nonrefundable and refundable portions of the new CARES Act employee retention credit claimed on the corporation's employment tax return(s)."

[Christin Boecker]

If you claim an ERC credit on a 941, then where does it all need to be reported on the 1120-S?  I know to reduce the wages on line 8, but does it appear on the M-1 or M-2 or K-1 anywhere?