Remember the ERC When You File Your Form 943
We have discussed several times the opportunity for farmers to claim the Employee Retention Credit (ERC) for wages paid during the first three quarters of 2021. In brief, you will qualify for the credit if your total gross receipts on a quarter-by-quarter basis in 2021 compared to the same quarter in 2019 are at least 20% lower. If you qualify for that quarter, you automatically qualify for the next quarter.
The credit is equal to 70% of wages paid up to a maximum of $10,000 of wages per employee per quarter including health insurance costs.
Now that the Form 943 is due by January 31, 2022, it is extremely important for you to review your quarterly revenues to determine if you qualify for the ERC. If you qualify, you will report this credit on Form 943 and can get a refund that exceeds the amount of payroll taxes paid during those quarters.
You may want to consider getting help this year in preparing your Form 943 if you do qualify for the ERC. It can be difficult to fill out the form properly if this is your first time.
Several of our smaller orchard clients with a fair amount of labor for harvest, pruning, etc. have easily qualified for over $100,000 of credit for each quarter in 2021.
If you do receive the credit in 2021, you are required to reduce your expenses by the amount of the credit when filing you 2021 income tax return even though you will report the credit in 2022.
Make sure not to pass up this credit if you qualify.
Remember, if you qualify in the first quarter, you automatically qualify in the second. If you qualify in the second, you automatically qualify in the third.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Is it true that you can also compare Q1 of 2021 to Q4 of 2020 for purposes of the 20% lower test? If so, and if Q1 of 2021 qualifies on this basis, does Q2 of 2021 also automatically qualify?