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How tribal businesses can claim the ERTC

Nov 09, 2022

Is your tribal business eligible for the Employee Retention Tax Credit (ERTC)?

In general, your tribal business can qualify if:

  1. Operations were fully or partially suspended by an appropriate government authority limiting commerce due to COVID-19.
  2. The business had a 50% reduction in 2020 gross receipts compared with the same calendar quarter in 2019, or a 20% reduction in 2021 gross receipts compared with the same calendar quarter in 2019.

The IRS provided additional guidance on tribal industries and the ERTC in Notice 2021-20. Question 3 addresses the question of whether tribal governments and tribal entities are eligible for the employee retention credit.

It was clarified that yes, any tribal government or tribal entity that operates a trade or business may be an eligible employer for purposes of the employee retention credit if it otherwise satisfies the eligibility requirements to claim the credit.

Tribes should proceed with caution on claiming the credit without doing the due diligence to ensure they are eligible for the credit. This month the IRS issued a warning that some “third parties are taking improper positions related to taxpayer eligibility for and computation of the credit.”

Improperly claiming the employee retention credit could result in repayment of the credit, plus penalties and interest. Therefore, it’s very important to have a qualified firm assist with any qualification and computation analysis.

Frequently asked questions

I am eligible to claim the ERTC. How do I  request the credit?

A request for refund is filed on a Form 941-X (for businesses that prepare Form 941). The quarter of 941-X to file depends on the original Form 941 that was prepared where the wages for purposes of the ERTC were reported. The refund is treated as a reduction in payroll taxes that were already paid on Form 941 against Social Security Taxes paid (if before July 1, 2021) or against Medicare taxes paid (if after June 30, 2021)

What is the maximum credit that can be received?

In short, for 2020 the ERTC is 50% of qualified wages (including allocable qualified health plan expenses) for each eligible employee, for a maximum of $10,000 of qualified wages per eligible employee for the year. For 2021, the ERTC is 70% as opposed to 50% in 2020, and the limit imposed is $10,000 of qualified wages per quarter for each eligible employee.

I already applied for and received PPP loan forgiveness. Am I still eligible for the ERTC?

Yes, a business is allowed to utilize both the PPP and the ERTC but may not use the same qualified wages for the ERTC that was already used for PPP forgiveness.

How long will it take to receive a refund once my 941-X is sent?

The IRS has a tremendous volume of 941-Xs that they are processing for the ERTC. It could take up to 10 months before seeing a refund, but there is the possibility of it taking less time or more time.

How should I send the 941-X?

We recommend sending any 941-Xs by mail, with return receipt requested in order to verify when the IRS receives it.

What if I already applied for ERTC but realize I am eligible for more than I received?

Another amended return can be filed on Form 941-X to claim any additional funds you are eligible for.

How Wipfli can help

If you believe you may be eligible for the ERTC or would like to discuss your unique circumstances, reach out to Wipfli for input about whether and how to proceed. We can help you determine your eligibility for the ERTC credit and whether it makes sense for you to apply.

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Author(s)

Lisa Desotelle, CPA
Partner
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Matt Thompson, CPA
Manager
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