Who Qualifies For The Employee Retention Tax Credit?
If you're an employer, then you may be wondering if your business qualifies for the Employee Retention Tax Credit. This credit is designed to help businesses who have suffered financially from the pandemic. It can provide a much-needed financial boost to keep employees employed and maintain operations.
Businesses that experienced a significant decline in gross receipts due to a pandemic-related, government-ordered shutdown may qualify for the Employee Retention Tax Credit.
To get a thorough understanding of the qualifications, we will cover the following points:
- Who Can Apply For Employee Retention Tax Credit
- Can I Get The Employee Retention Credit If I Got The PPP Loans
- IRS Employee Retention Tax Credit Qualifications
- Employee Retention Tax Credit Qualifications Gross Receipts
- Definition Of Gross Receipts For Employee Retention Tax Credit
- What Is The Maximum Employee Retention Tax Credit?
- How Long Does It Take To Get A Refund From Employee Retention Tax Credit?
- How Do I Apply For Employee Retention Tax Credit?
- Best Employee Retention Credit Filing Company
Who Can Apply For Employee Retention Tax Credit
Do you run a business and have been affected by the COVID-19 pandemic? If so, you may be eligible for the Employee Retention Tax Credit.
The ERC is a refundable tax credit designed to help businesses who had to shut down or experienced significant drops in gross receipts between March 13th 2020 and December 31st 2021. To qualify, your company must have either suffered a full or partial suspension of operations due to orders from an appropriate governmental authority or had a large decline in revenue during this time period.
Recovery startup businesses that begin operations after December 31st 2020 are also eligible for the tax credit in their 4th quarter of 2021. There are some limitations however - wages reported as payroll costs for PPP loan forgiveness or other credits can't be claimed for the ERC.
In order to claim the ERC there is specific paperwork that needs to be filled out depending on which quarter you're claiming it for. Forms such as Form 941-X Instructions April 2022 Revision, Form 943, Form CT-1 X Instructions, etc should be used when filing your taxes each quarter.
It's important to know if you're eligible and what forms need to be filled out correctly so that you don't miss out on receiving this beneficial credit! Make sure you read up on all regulations before filling out any forms related to the ERC and consult with a qualified accountant if needed.
Can I Get The Employee Retention Credit If I Got The PPP Loans
The Employee Retention Credit (ERC) can be a great way for businesses to get extra help during the pandemic. It's important to remember though, that if you've received PPP loans then there are some restrictions on what credits you're able to claim.
The IRS recently updated their guidance so that businesses can participate in both the PPP and ERC at the same time, but this will only apply going back to 03/12/2020. It's also important to note that wages reported as payroll costs for PPP loan forgiveness or certain other tax credits cannot be claimed for the ERC in any tax period.
This means that your business needs to make sure it is tracking different wage expenses when filing taxes accurately and ensuring they don't overlap with each other. In addition, it may be helpful for businesses to reach out to an accountant who has experience with these types of credits.
A professional can help navigate through complicated paperwork and advise on how best to use available resources.
Fortunately, we have provided a service that focuses primarily on this specific tax credit. ERTC Express. ERTC Express backends for most CPA and accounting firms seeking to have this credit processed. See the details at the end of this article. To get started right away, click the link here or the button at the bottom of this page to be taken to ERTC Express's secure portal and begin your claim.
IRS Employee Retention Tax Credit Qualifications
Transitioning from the PPP loans, let's look at Employee Retention Tax Credit qualifications. The IRS has some requirements if you want to get this tax credit.
To qualify, an employer must have either had their operations suspended due to government orders related to COVID-19 or experienced a significant decline in gross receipts during 2020 and/or 2021. They can also be considered a 'recovery startup business' for the third or fourth quarter of 2021.
If these criteria are met, then employers may receive up to $5,000 per employee as a refundable tax credit. This is especially helpful for businesses that were impacted by restrictions from the pandemic.
It helps cover certain expenses such as wages, health care costs and more.
Employers will need to file Form 941 quarterly with additional information on how they used funds received through the ERC program. That way they can make sure everything was done properly so they don't run into any problems later down the line when filing taxes.
Knowing all the details about who qualifies and how the employee retention tax credit works is essential before applying for this type of assistance!
Employee Retention Tax Credit Qualifications Gross Receipts
Employees may qualify for the Employee Retention Tax Credit if their business has experienced a significant decline in gross receipts. Gross receipts are all the income earned by a company, minus returns and allowances. This includes money from product or service sales, interest, dividends, rents, royalties, fees, taxes collected from customers and more.
To be eligible for this credit, businesses must have seen at least a 20% drop in gross receipts during any quarter of 2020 compared to the same quarter in 2019. The tax credit can also apply to companies that had no revenue in one of those quarters due to COVID-19 related shutdowns. However, some types of income such as investment earnings don’t count towards qualifying for the credit.
Companies that want to claim this tax break need to file their quarterly payroll reports with the IRS each quarter they are claiming it. In addition to filing paperwork with the IRS, employers should make sure they calculate their employees’ wages correctly when determining whether they meet the criteria for eligibility. Employers should also keep records of all expenses associated with providing benefits under this program so that these costs can be taken into account when calculating how much credit is available for them to claim.
Definition Of Gross Receipts For Employee Retention Tax Credit
Gross receipts are an important part of the Employee Retention Tax Credit (ERTC). Basically, gross receipts include all income that comes in to a business. This includes sales from products and services, interest, rents, fees and commissions, but not returns or allowances. Taxes collected for and sent to government authorities should also be included in the gross revenues number. Amounts taken by travel agents, real estate agents etc., on behalf of someone else, must also be counted as part of the total gross revenue. Other expenses like subcontractor fees do not count towards this amount though.
It's possible for employers to claim the advance payment credit through Form 941-X if their revenues have dropped significantly since January 1st 2021. The safe harbor rule allows companies to exclude certain grants and forgiveness amounts from gross receipts when calculating eligibility for ERC credits.
Employee turnover is one of the biggest problems facing businesses today; nearly 42 million Americans quit their jobs last year alone!
To help reduce employee turnover rates many organizations look into offering incentives such as ERTC which can provide great financial benefits with minimal effort. It's always worth checking out what options are available so companies can make sure they're getting the best deal out there!
What Is The Maximum Employee Retention Tax Credit?
So, what exactly are gross receipts? Gross receipts are the total income you receive from your business. This includes any money that comes in through sales of goods or services, interest, royalties and rent payments. It also includes any taxable federal grants or subsidies you may have received.
Now that we know what qualifies as gross receipts, let's move on to understanding how much an employer can get with the Employee Retention Tax Credit (ERTC). The ERTC is a tax credit against certain payroll taxes for wages paid between March 12th 2020 and December 31st 2021. The amount of maximum tax credit is up to $7,000 per employee per quarter with a total benefit of up to $28,000 for 2021.
If the amount of the tax credit for an employer is more than their share of social security taxes owed, then they will be refunded directly by the government. Businesses that took out Paycheck Protection Program loans in 2020 can still claim the ERTC but cannot use those same wages for PPP forgiveness and count towards ERC at the same time. However, if businesses had additional payroll costs beyond their PPP loan coverage they may be able to apply these expenses toward claiming credits too.
So it's important to review all options when considering qualification for this tax credit program.
How Long Does It Take To Get A Refund From Employee Retention Tax Credit?
The process to receive a refund from the Employee Retention Tax Credit can take some time. Depending on all of the required data, it could take up to two or three weeks for us to amend their 941-x form.
After that's done, there may be several more steps before you get your refund. We must also submit any requested documents and wait for review by an authorized personnel member.
It's important to have patience during this process since it takes some time to do everything correctly. Once we've completed our work, you'll be able to quickly start receiving your credit and refund!
If you are looking for a service to manage the complexity, create a fast track for your claim, and navigate the process for you without the worry of a miscalculation or audit. ERTC Specialists exclusively processes this specific claim with seasoned account experts trained to this purpose only. Click the button below to eliminate this headache and start fast tracking your ERTC claim today.
How Do I Apply For Employee Retention Tax Credit?
It's important to know how long it will take for you to get a refund from the Employee Retention Tax Credit. Fortunately, once you've applied and your business is eligible for the 2020 ERC, filing amended payroll tax forms could be all it takes for you to receive your refund quickly. After that, the processing time depends on how quickly the IRS receives and processes your documents. It can range from several weeks up to several months if there are unexpected delays or complications with your return.
Now let's talk about applying for the Employee Retention Tax Credit in the first place. To qualify, employers must have been affected by government-mandated closures due to COVID-19 or experienced a significant decline of gross receipts during certain periods of 2020 compared to 2019. Employers who meet either criteria may be eligible for a fully refundable credit against employment taxes equal to 50% of qualified wages paid after March 12th, 2020 and before January 1st 2021 (up to $5,000 per employee).
Once you're sure your business meets these requirements and you've determined which quarter(s) you'd like to claim the credit for, then it's time for action! You'll need to fill out Form 941 - Employer’s Quarterly Federal Tax Return - as well as any other necessary forms related to claiming credits like Form 7200 Advance Payment of Employer Credits Due To Covid–19.
Once those are filled out and submitted along with any supporting documentation needed, everything should go smoothly from there and hopefully soon enough you'll get that sweet cash back as a reward for keeping employees on board through some tough times.
Best Employee Retention Credit Filing Company
Employers have the opportunity to take advantage of the Employee Retention Credit and reduce their taxes. This credit is available for a limited time, so it's important to act quickly.
The ERC claim filing process is quite complex and is largely the reason most CPA's advised businesses to choose the PPP loan plan alternatively. ERC Specialists provide a focused and dedicated service for processing ERC claims exclusively. Most business CPAs reach out to ERC Specialists for their Employee Retention Tax Credit claim needs.
It should be noted, that despite the temporary Employee Retention Credit Pause by the IRS, LINQQ’s and ERC Specialists continue to submit files and assist businesses in applying for the Employee Retention Credit. This will ensure that their clients will be at the front of the line when processing resumes. The program is still active, and the IRS is still accepting ERC submissions.
Click the button below to access the secure LINNQs portal get this claim started and ERC Specialists will do the rest.
Frequently Asked Questions
What is the Employee Rentention Credit (ERC)?
The Coronavirus Aid, Relief, and Economic Security Ac, signed into law on March 27, 2020, included two programs to assist businesses with keeping workers employe: Employee Retention Tax Credit (ERTC) administered by the Internal Revenue Service and the Payroll Protection Program (PPP) administered by the Small Business Administration.
How is ERTC different from the Payroll Protection Program(PPP)?
PPP funds are not taxable as revenue and you may still take deductions for the payroll covered by PPP. The funds from the PPP are distributed based on 2.5 months of payroll and a minimum of 80% of the funds must be used on payroll to be eligible for forgiveness.
ERTC tax credits, however, are credits (or refunds) for a percentage of payroll in each quarter that you qualify. There are specific rules for determining eligibility by quarter, and limiting the dollars that can be claimed for each employee.
If I Received Funds from the PPP, Do I Still Qualify for the ERTC?
The short answer is “Yes”. You can claim ERTC even if you received PPP funds. In March of 2021, The American Rescue Plan Act of 2021 created expansions and modifications to existing criteria of Employee Retention Tax Credit.
Businesses that received PPP funds could now also claim ERTC tax credits. ERTC credits can be retroactively claimed for businesses that qualified in 2020. The ERTC qualification period was extended through 9/30/21 with lower eligibility requirements.
The refundable credit amount increased from 50% of qualifying wages in 2020 to 70% in 2021. The per-employee cap on qualifying wages was increased from $10,000 for all of 2020 to $10,000 per quarter for the first 3 quarters of 2021.
How Do I Apply for the Employee Retention Tax Credit and My CPA Do This?
Unlike the Payroll Protection Program, there is technically no application process for the Employee Retention Tax Credits. You would simply claim the ERTC tax credit like any other tax credit by asserting to the IRS that you can legally claim the credit.
Whether your tax accountant is a CPA or EA, they most likely only prepare Federal and State Income Tax Returns. However, ERC credits are claimed against Employment Taxes on Form 941, and cash advanced through Form 7200.
The ERC program is quite complex, which one of the main reasons most CPA's do not mention or attempt the claim process. It is also the reason most businesses pursued the PPP loan instead.
For prior quarters, you must file an amended form (the Form 941-X) to reduce your current quarter’s tax contribution. Also, you must request a refund of excess credits.
ERC Specialists focus only in this specific tax credit in order to maximize refunds, ensure accuracy, bulletproof your claim and save time. ERC Specialists provide audit protection and peace of mind.
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