As a response to the economic distress caused by the COVID-19 pandemic, the government has rolled out several relief programs for businesses, including the Employee Retention Credit (ERC).
If you are a business owner who the pandemic has impacted, you may be eligible for the ERC, which is designed to incentivize businesses to retain their employees.
In this blog, we will guide you on where to mail your 941 X form for the ERC and give you some useful information on the eligibility criteria, the required documents, and the claiming process for the credit.
Employee Retention Credit (ERC)
The Employee Retention Credit (ERC) is a refundable tax credit designed to encourage businesses to keep their employees on the payroll. The ERC was introduced in March 2020 under the CARES Act and was extended several times, most recently through December 31, 2021, under the Consolidated Appropriations Act 2021.
The ERC is available to both for-profit and nonprofit organizations that the COVID-19 pandemic has impacted. The ERC is based on the qualified wages paid to employees and covers up to 70% of the first $10,000 of qualified wages paid to an employee in a calendar quarter.
The credit amount varies depending on the size of the business, the number of employees, and the level of business activity.
Eligibility For ERC
To be eligible for the ERC, you must satisfy one of the two eligibility criteria established by the government. The first criterion is a partial or full suspension of operations due to government orders, and the second is a significant decline in gross receipts.
Partial Or Full Suspension Of Operations
If the government partially or fully suspended your business due to COVID-19 restrictions, you may qualify for the ERC. This includes businesses forced to close or reduce their operations due to COVID-19-related restrictions. To claim the ERC under this criterion, you may be asked to provide documentation showing your business was suspended. The rules for this provision are complex and described in a variety of IRS Notes.
Significant Decline In Gross Receipts
If your business has experienced a significant decline in gross receipts, you may also be eligible for the ERC. A significant decline is defined as a 20% or more decrease in gross receipts for the same calendar quarter in 2019. To claim the ERC under this criterion, you must provide documentation showing the decline in gross receipts.
Documents To Prepare
To claim the ERC, you will need to provide the following documents:
Amended IRS Form 941
You will need to file an amended Form 941-X for each quarter you claim the credit. Form 941 is the employer’s quarterly tax return that reports the wages paid to employees, the taxes withheld from employees, and the employer’s share of payroll taxes. (SpiderERC prepared these forms for our clients.)
Employee Wage Information
You must have on hand the wage information for each employee for the applicable quarters, in order to properly calculate your credit. This includes gross wages, health care costs, and retirement benefits. You can obtain this information from your payroll records.
Documentation of Business Suspension or Gross Receipts Decline
If applicable, you must have documentation showing how government orders suspended your business or that your gross receipts declined by 20% or more in 2020 or 2021. The documentation required may vary depending on the eligibility criterion that you are claiming under.
Where To Mail 941-X For ERC:
To claim the ERC, businesses must file an amended Form 941-X for each quarter they claim the credit. The 941-X form is used to correct errors made on previously filed Forms 941. Businesses must mail the 941-X form to the appropriate address listed on the form instructions.
The IRS provides different addresses for businesses located in different states. It’s important to ensure that you are mailing the 941-X form to the correct address for your state to avoid delays or rejections of your claim.
Here are the mailing addresses for each state:
- Alabama, Arizona, Arkansas, Connecticut, Delaware, Florida, Georgia, Kentucky, Louisiana, Maine, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, West Virginia, Wisconsin:
Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999-0029
- Alaska, California, Colorado, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Oregon, South Dakota, Utah, Washington, Washington, DC, Wyoming:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0029
It’s recommended to use certified mail or a recognized delivery service when mailing your 941-X form to ensure the IRS receives it.
The Time It Takes To Receive ERC
The time it takes to receive your ERC varies depending on various factors, including the complexity of your claim, the volume of claims the IRS is processing, and the accuracy and completeness of your application.
Generally, the IRS takes about six to eight months to process an ERC claim. However, this timeline can be extended if the IRS needs more information or documentation to process your claim accurately. Additionally, if you have errors in your application, it can significantly delay the processing time.
To avoid delays in receiving your ERC, ensuring that your application is accurate, complete, and includes all the necessary documentation is essential. You can check the status of your claim by calling the IRS ERC hotline or by checking the IRS website.
The Employee Retention Credit is an essential relief program that can provide financial support to businesses impacted by the COVID-19 pandemic. If you believe you are eligible for the ERC, gather all the necessary documents and follow the claiming process carefully.
Remember to mail your completed Form 941-X to the appropriate IRS address and keep a copy of all documents for your records. With these steps, you can successfully claim the ERC and access the much-needed financial assistance for your business.
Can businesses claim both the ERC and Paycheck Protection Program (PPP) loans?
Yes, businesses can claim both ERC and PPP loans, but they cannot use the same wages to qualify for both. Wages used for PPP loan forgiveness cannot be used to claim the ERC, but wages that are not eligible for PPP loan forgiveness can be used for the ERC.
Are there any special rules for claiming the ERC for new businesses?
Yes, startup businesses that began operations after February 15, 2020, and have an average annual gross receipts of $1 million or less are eligible to claim the ERC. These businesses can claim the credit up to $50,000 per quarter for 2021, regardless of the number of employees they have.