Employee Retention Tax Credit

Has your business been affected by COVID-19?

There is some relief available from the government in the form of the Employee Retention Tax Credit (ERTC), which allows you to receive up to $26,000 per qualified employee!

Who qualifies for this credit?

In the last few months, President Biden has been encouraging businesses to take advantage of one of the largest tax credits ever created for small businesses with up to 500 full-time employees (30hrs/week) through the Employee Retention Tax Credit.

This credit technically already existed for declared disaster areas throughout the U.S. However, in March 2020, the CARES Act assimilated the ERTC into its relief package, specifically for COVID-19. The American Rescue Plan Act (ARPA), signed in March of this year, expanded the credit further.

How many businesses have benefited from this credit?

To date, over 50,000 businesses have claimed more than $1 billion in ERTC. Still, the Biden administration wants to increase awareness of the program and said the Treasury Department would release further guidance about the ERTC in the very near future.

What do you need to know?

For 2020 the ERTC provides a refundable tax credit of 50% of up to $10,000 in qualified wages paid per employee for the year. That means eligible businesses can claim up to $5,000 per employee for last year.

What if we took the PPP loan, can we still qualify?

Previous to ARPA, if you took a Paycheck Protection Plan (PPP) loan, you could not receive ERTC. That is no longer the case, as the law has been changed to include companies that took the PPP. In fact, the law has changed at least seven times, since it went into effect in March of 2020. So, companies that previously did/ could not qualify because they had taken the PPP, now qualify for the ERTC.

The ARPA expanded the ERTC, making almost every small employer (with up to 500 full-time employees) eligible. It also extended ERTC through the end of 2021 and increased the credit dramatically.

For 2021, the ERTC provides a refundable tax credit of 70% of up to $10,0000 in qualified wages paid per employee per quarter. This brought the total annual amount of the credit to $28,000 per employee for 2021. That was more than five times the original credit! With the recent passage of the $1 Trillion Infrastructure Bill, Congress has reduced the qualifying period from the end of December 2021, to the end of September 2021.

This means that money which was originally allocated to cover the fourth quarter of 2021 under ERTC, has now been reassigned for use in the infrastructure bill. In other words, Congress has taken out some of the money originally intended to pay out to small businesses under the ERTC, to use for something else and they will continue to do that as long as businesses don’t claim this money, until it eventually runs out! (Remember, they ran out of money for the first round of the PPP).

https://www.journalofaccountancy.com/news/2021/nov/infrastructure- bill-tax-provisions-include-erc-termination.html

Infrastructure bill tax provisions include ERC termination – Journal of Accountancy news

The employee retention credit will be terminated early and broker reporting of cryptoasset transfers will be required as a result of legislation (H.R. 3684) that passed the House of Representatives late Friday and is headed to President Joe Biden’s desk to be signed into law.

www.journalofaccountancy.com

How do you get the money?

The tax credit initially is applied against employment taxes for the business, offsetting most, if not all liability in employment tax.

What happens if your credit is more than you owe in employment taxes?

The IRS sends you a check back for the difference!

Are you eligible?

Eligibility for 2020 and 2021 is different. For 2020, businesses must have either experienced a full or partial shutdown, or disruption of business operations during the year because of COVID, or had a 50% or more decline in gross receipts in any quarter. You just need to have experienced any one of the above, to qualify.

For 2021, businesses must have either experienced the disruptions above or a more than 20% decline in gross receipts in any quarter, to qualify.

How can I calculate how much I may be eligible for?

The devil is in the details… What does full or partial shutdown mean? How many quarters do I need to have seen a decline? What if I was only shut down for a few days or hours were cut? Does that qualify? What if I took PPP in 2020 or 2021? What if I have over 500 employees?

“It’s very complicated, even though it’s very favorable,” said Mark Steber, Chief Tax officer at Jackson Hewitt Tax Services. “Do not wade into this program without some competent help.”

We are here to help you navigate through all these complexities by offering a free analysis to businesses to see if they qualify for this credit and if so, how much they can expect to receive.

Once that free evaluation is done, a Credit Projection Report (CPR) is then issued, which gives you an estimate of how much your company could get back from the IRS.

To see how much you could potentially recover, you can fill out the survey (to be sent) and email the completed form back to me. Once the CPA’s receive the completed survey, they will run the numbers and issue a CPR for your company. When you receive your CPR, you can decide at that point to engage to work to get this money for you or you can choose not to take advantage of this generous tax credit that Congress put in place to help small businesses survive the COVID-19 pandemic.

For inquiries, please email viatimes@comcast.net.