ERC refund reporting for 2025
View More DetailsI want to make sure I'm reporting ERC refunds correctly. My understanding is we report refunds from 2020 Q2 through 2021 Q3 received in 2025 on the 2025 return (1120S in my case). The credit is reported as "other income" instead of reducing wages expense and is taxable only to federal. The interest received is reported as interest income and is taxable to both federal and CA.
Comments
That is correct. You actually got some refunds in 2025? Wow. Must have been one that got held up for a while. congrats.
I also have been seeing a lot of refunds in 2025 for some of my clients.
I have seen other reports saying the amount should in included as "gross receipts". Which is it?
I would do a separate income line item called ERC refund. That way it’s clearly defined on the tax return. I’m sure preparers are recording in different ways. Ultimately all that matters is that it increases net income.
Just saw this and wanted to make the correction that the ERC refunds picked up in 2025 are NOT taxable to CA. See the page 9-3 from the 2025-2026 Federal and CA Tax Update.
That is another reason why we would do a separate line item for ERC refunds. Easier to track the non-taxable portion of the ERC refund on CA. However, the interest is taxable to both fed and state (but that's a separate interest income line).
