[US] Employee Retention Credit (ERC)

The Employee Retention Credit (ERC), is a refundable payroll credit for eligible employers whose businesses have been negatively affected by the COVID-19 pandemic. Learn more about the ERC and your Wave Payroll account below.

ERC for Recovery Startup Businesses introduced for Q3 and Q4 of 2021 is not supported in Wave. The ERC calculation in Wave should not be used to claim the ERC for Recovery Startup Business, as it may result in inaccurate credit calculations and reporting. 

What is the ERC?

The ERC, enacted as part of H.R.748 CARES Act, provides a refundable payroll credit for eligible employers, whose businesses have been negatively affected by the COVID-19 pandemic. Consult the IRS Coronavirus Tax Relief - Employer Tax Credits website for the most current guidance on the ERC. 

November, 2021: New legislation ends the Employee Retention Credit early

Bill H.R. 3684: Infrastructure Investment and Jobs Act was signed into law on November 15, 2021. This bill ends the ERC program effective September 30, 2021. 

This change means that credits claimed on payrolls with a payday in Quarter 4 (October - December), 2021 are now considered due tax liabilities. The amounts are owed to the Internal Revenue Service (IRS).

How do I turn off the ERC in Wave?

Employers who were opted into the ERC in Wave on November 8, 2021 have automatically been opted out. No action is needed from you to stop calculating the credit in Wave. Read on to learn about depositing your Quarter 4, 2021 claimed amount.

Quarter 4, 2021 Claimed ERC amounts

Now that bill H.R. 3684 has been signed into law, any ERC amounts claimed in Quarter 4, 2021 will be due to the IRS.

Wave sent all employers opted into the ERC in Wave and enrolled in Payroll Tax Service an email on November 11, 2021, outlining next steps for payments that are due retroactively. Employers opted into the ERC in Wave and not enrolled in Payroll Tax Service were sent more information by email on November 16, 2021.

Will payments for the Q4, 2021 claimed amounts be scheduled as part of Payroll Tax Service?

If you are enrolled in Payroll Tax Service, Wave will schedule payment for the liabilities resulting from Q4 claimed amounts coming due and send affected employers email reminders of the amount due and withdrawal date. Liabilities that are due or overdue will be withdrawn and paid in November, separate to other tax payments. Liabilities that are still accumulating will be withdrawn and paid according to employers' normal IRS Federal Withholding Tax payment schedule.

If you are not enrolled in Payroll Tax Service, you should confirm the Q4 claimed amount and deposit payment directly to the IRS.

How can I review the Q4, 2021 claimed amount?

Wave updated your payroll liabilities on November 16 to include the ERC amounts that are now due or overdue as a result of the early end to the ERC. To view your ERC liabilities in Wave:

  1. Select Payroll > Taxes
  2. Click Due Taxes
  3. Locate all IRS - Federal Income Tax Withholding amounts. (If you’re a semiweekly depositor there may be more than one payment.)
  4. Click the arrow beside the due amount to expand the details.
  5. The amount listed beside Employee Retention Credit (CARES Act) is the amount due to the IRS.

How is the ERC bookkept in Wave?

When opted into ERC in Wave, a journal transaction will automatically be created including a line item for the Employee Retention Credit as an Uncategorized Income credit. You should recategorize the Employee Retention Credit line item as outlined in Bookkeeping the ERC.