Reporting the ERC as Income

  • An Eligible Employer receiving an ERC for qualified wages does not need to include any portion of the credit in gross income for federal income tax purposes.
  • However, the ERC refund will reduce the payroll tax expense deductions.  
  • Section 2301(e) of the CARES Act provides that rules similar to section 280C(a) of the internal Revenue Code (the "code”) shall apply for purposes of applying the ERC.  
  • Section 280C(a) of the Code generally disallows a deduction for the portion of wages paid equal to the sum of certain credits determined for the taxable year. 
  • It is important that you let the CPA, who files your business income returns, know when you receive your refund check. This will allow them to correctly report the amounts on your business income return.



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