Do you own a business and wonder if you qualify for the Employee Retention Credit (ERC)?
The ERC is part of the Coronavirus Aid, Relief, and Economic Security Act (CARES). It’s designed to help businesses keep their employees on payroll during the pandemic.
To better understand whether or not your business qualifies for this credit, let’s look at some of the eligibility criteria, qualified wages, timelines, deadlines and how to claim it.
Eligibility Criteria
For 2020, employers must have either experienced a full or partial suspension of operations due to a governmental order limiting commerce, travel or group meetings because of COVID-19, or had a significant decline in gross receipts by more than 50% when compared to the same quarter in the prior year. Shutdowns include hour of operation or capacity restrictions, or a change in operations, such as drive thru only for restaurants.
In 2021, an employer is eligible for ERC if they experienced either a full or partial suspension of operations on account of governmental orders due to COVID-19, or saw their gross receipts decline by 20% compared with the same calendar quarter in 2019.
The maximum amount of qualified wages taken into account concerning each employee for all calendar quarters is $10,000 and the credit for each qualifying employer is 50% of the first $10,000 in qualified wages (up to $5,000 per employee) during 2020; 70% (up to $7,000) per employee per quarter during 2021. Wages are defined as taxable wages including certain contributions to health benefit plans.
If your business meets these criteria, then you may be eligible for up to $26,000 in credits from claiming ERC this year. Take advantage now and see if you qualify!
PPP and ERC Eligibility
You may be able to get both PPP and ERC benefits, so don’t miss out on the chance to reclaim payroll taxes.
The Employee Retention Credit (ERC) was designed to provide businesses with support during the impacts of COVID-19. This credit has been recently expanded, making more businesses eligible for a tax refund in 2021. In addition to this expansion, companies who have already received Paycheck Protection Program (PPP) funds may still be eligible for ERC if they meet certain criteria.
In order to qualify for both PPP and ERC benefits, your business must have experienced revenue losses due to COVID-19. Your business must also not have previously claimed the maximum amount of ERC allowed in 2020. Lastly, your business must meet other eligibility criteria such as having a gross income of no more than $10 million per year or having fewer than 500 full-time employees.
It’s important that you understand all the requirements before applying for either program. It’s possible that you could receive funding from both programs if you meet all of the criteria. To ensure that you’re taking advantage of every opportunity available, it’s essential to review all eligibility requirements and speak with an expert in the ERC program if needed.
Qualified Wages
The amount of qualified wages is determined by the number of full-time employees employed by the business:
- For businesses with more than 100 full-time employees, qualified wages refer to the wages given to an employee for time they weren’t working due to a government order that either completely or partially suspended operations or a significant drop in gross receipts.
- For businesses with 100 or fewer full-time employees, qualified wages are all wages paid during a period when business operations were completely or partially halted due to a governmental order or when gross receipts significantly dropped.
Employers should note that health plan expenses must also be included as part of their qualified wage calculation. Employers who spend money on health plans for their workers after March 12, 2020, can include those expenses in their ERC calculations as well, which will help them receive greater deductions and credits at tax time. This makes it even easier to get extra savings from taking advantage of this credit opportunity.
Timelines and Deadlines
To maximize the benefits of the Employee Retention Credit, it’s important to stay up-to-date on all timelines and deadlines associated with filing your amended employment tax returns.
Generally, employers who qualify for the ERC have three years from the date of filing Form 941 to file an amended return. The period of limitations to amend the form begins on April 15th of the succeeding year in which it was filed.
For example, an employer must submit their amended return for Q2 2021 by April 15, 2025.
It is critical that employers keep appropriate documentation for meeting compliance requirements and successfully navigating through their obligations related to the ERC eligibility and claims process.
Outsourcing this process can help employers maximize their credit by utilizing up-to-date technology solutions in combination with tax credit specialists who assist with identifying qualification status and accurately claiming full credits as well as proper payroll tracking and documentation maintenance.
This approach ensures accuracy while avoiding costly mistakes or penalties due to incorrect filings or missed deadlines.
It also allows businesses to take advantage of any late changes or updates issued by IRS so they can receive maximum benefit from their ERC claim without worrying about missing out on key information or updates due to lack of knowledge or resources.
It is important for employers to understand how their business qualifies for ERC benefits in order to make sure all timelines and deadlines are met as well as ensure efficient claims processing and accurate results.
Outsourcing the entire process helps minimize risk during this time while ensuring that businesses get full advantage out of available credits with minimal effort required from them.
Claiming the Credit
Claiming the Employee Retention Credit requires understanding your business’s qualifications and staying up-to-date on timelines and deadlines. If you’re eligible for the ERC, you’ll need to file either IRS Form 944-X or 943-X, depending on the type of business you own.
This form modifies the payroll tax return documents that were previously submitted at the end of a quarter, so it’s important to determine which one applies before filing. An accountant, tax professional, or ERC specialist can help guide you through this process as they’re familiar with all necessary steps for claiming this credit.
To make sure that everything is completed correctly and timely, it’s recommended to work with an experienced professional who can provide guidance in filling out the correct forms and ensure submission compliance.
Conclusion
You may be wondering if your business is eligible for the Employee Retention Credit (ERC). To qualify, you must meet certain criteria such as PPP and ERC eligibility, as well as qualified wages.
Additionally, there are timelines and deadlines to take into consideration when claiming the credit. Ultimately, it’s important that you review all of these factors carefully to ensure your business meets the requirements for the ERC.
With this knowledge in hand, you’ll be able to confidently determine if your business qualifies for this valuable benefit.