Getting More in ERC Credit Than Paid in Taxes
The Employee Retention Credit is calculated according to payroll wages paid, not on income taxes. ERC funds not applied towards owed payroll taxes are treated as an 'over deposit' of taxes which will be requested as a refund check from the IRS.
"In order to claim the Employee Retention Credit, eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns...The credit is taken against the employer's share of Social Security tax but the excess is refundable under normal procedures.
In anticipation of claiming the credit, employers can retain a corresponding amount of the employment taxes that otherwise would have been deposited, including federal income tax withholding, the employees' share of Social Security and Medicare taxes, and the employer's share of Social Security and Medicare taxes for all employees, up to the amount of the credit, without penalty, taking into account any reduction for deposits in anticipation of the paid sick and family leave credit provided in the Families First Coronavirus Response Act" (IRS, Claiming the Credit).