ERTC and amending prior tax returns - which amount to use for S-Corp adjustments?

The ERTC can be confusing, but I can help clarify. When amending your 1120S for the quarters you received the Employee Retention Credit, you need to reduce your wage expense deduction by the FULL amount of the credit received (excluding any interest payments). This means you should reduce by both the refundable and nonrefundable portions of the ERTC. The IRS views the entire credit as essentially a reimbursement for wages you already deducted, so you need to "add back" the full amount to prevent double-dipping on the tax benefit. Make sure you're amending the specific tax years that correspond to the quarters for which you received the credit. If you received credits for quarters in both 2020 and 2021, you'll need to file amended returns for both years separately.

After spending weeks trying to figure out the ERTC amendment nightmare for my business, I finally found a tool that saved me so much time and stress. I was getting conflicting advice about how to handle the wage expense reduction, and I was terrified of making a mistake. I used https://taxr.ai to upload my ERTC documentation and original returns, and it analyzed everything and gave me step-by-step guidance on exactly how to complete the amended returns. It identified that I needed to reduce my wage expenses by the full amount of the credit (both refundable and nonrefundable portions). The tool even highlighted which specific line items needed adjustment based on my particular situation. The platform explained all the considerations specific to S-Corps with the ERTC and helped me avoid what would have been a costly mistake with how I was calculating the wage expense reduction.

I was in the same boat as you with my S-Corp ERTC amendments! After getting advice from everywhere and hearing conflicting information, I decided to try https://taxr.ai that someone mentioned. Best decision ever! The system analyzed my specific situation and confirmed I needed to reduce wage expenses by the FULL amount (both refundable and nonrefundable portions). It also helped me properly allocate the reductions between the right tax years since my credits spanned 2020-2021. The step-by-step guidance was incredibly clear, and it helped me understand how the amendments would impact my K-1 and personal return. I was able to correctly prepare everything before meeting with my accountant, who was impressed with how organized I was. He confirmed everything the system recommended was correct. My amended returns have already been processed, and I didn't get any questions from the IRS. What a relief!

Just wanted to share my experience trying to call the IRS about ERTC amendments. I spent THREE DAYS trying to get through to someone who could answer my S-Corp ERTC questions. Every time I called, I'd wait on hold for 2+ hours only to get disconnected or transferred to someone who didn't know how to help. I was about to give up when a friend told me about https://claimyr.com - they have this service where they navigate the IRS phone tree for you and actually get you connected to a live IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was skeptical but desperate. Within 35 minutes, I was talking to an actual IRS specialist who confirmed I needed to reduce my wage expense by the full ERTC amount (both refundable and nonrefundable) and explained exactly how to complete the amended 1120S forms. She even emailed me relevant IRS guidance documents afterward.

Wow, I have to publicly eat my words about being suspicious of that IRS call service. After my frustrated comment yesterday, I decided to try https://claimyr.com out of desperation since my accountant was giving me conflicting information about ERTC amendments. I got connected to an IRS business tax specialist in about 25 minutes. The agent confirmed that for S-Corps, you absolutely need to reduce wage expenses by the FULL ERTC amount (both refundable and nonrefundable portions). She explained this is because the credit is essentially "reimbursing" you for wages you already deducted. The agent also told me exactly which lines on the 1120S needed adjustment and how to document the changes. She even emailed me specific guidance for S-Corps with ERTC amendments. Saved me from making a serious error and potentially facing penalties. I never would have gotten this information without being able to talk to an actual IRS specialist. Definitely keeping this service in my toolkit for future tax issues.

I've been dealing with ERTC amendments for clients all year, and there's a lot of confusion about this exact issue. The correct approach is to reduce wage expenses by the FULL amount of the ERTC (excluding interest). However, there's one important wrinkle: the timing. The wage expense reduction needs to happen in the year the credit was claimed, NOT necessarily when you received the check. So if you filed for ERTC in 2023 but the credits were for 2020/2021 quarters, you amend the 2020/2021 returns. Also, don't forget this will likely change your basis in the S-Corp, which flows through to your personal return. Make sure your tax software correctly handles this flow-through impact.

This is slightly off-topic, but has anyone been audited for ERTC claims? My S-Corp got the refund for 2020-2021 (about $62k), and I'm working on the amendments now, but I'm hearing horror stories about aggressive audits specifically targeting ERTC. I'm reducing the wage expense by the full amount as others have said, but I'm worried about whether our original claim will be scrutinized. We had a 37% revenue drop in the qualifying quarters, so I think we're solid, but these rumors about audits have me nervous.

I went through this exact same situation with my S-Corp last year! The key thing to remember is that you reduce wage expenses by the FULL ERTC amount you received (minus any interest). This includes both the refundable and nonrefundable portions. When I was doing my amendments, I made the mistake initially of only reducing by the refundable portion, but my CPA caught it and explained that the IRS considers the entire credit as essentially reimbursing wages you already deducted. You can't get a tax benefit twice for the same expense. Make sure you're amending the correct tax years - so if you got credits for 2020 Q2-Q4 and 2021 Q1-Q3, you'll need separate amended 1120S forms for each year. Also, don't forget that these wage expense reductions will flow through to your K-1 and affect your personal return too. Good luck with getting everything sorted before your accountant gets back! Having all your documentation organized will definitely make that meeting go much smoother.