The Employee Retention Tax Credit (ERTC) is an unrepayable tax credit for eligible employers who retain their employees throughout the COVID-19 epidemic. The credit is offered to businesses of all sizes and is especially beneficial to small-sized companies. If you`re an eligible employer, you may claim the credit for each qualified employee you hire. In order to be eligible to claim the ERTC, you must have had a drop in gross revenue of at least 50% when compared to the same quarter in the previous year.
Additionally, you must keep your employees in the midst of the epidemic and haven`t laid them off or furloughed them. If you qualify for the ERTC you may use it to claim your quarterly payroll tax return or Form 941. You may also opt to receive prepayments of the credit from the IRS. The ERTC is one of the tax deductions and tax credits which are available to companies that are affected by the COVID-19 epidemic. If you`re a business owner, you should consult your financial advisor or accountant about the many relief options offered to you.
What is the Employee Retention Tax Credit?
The credit is open to all employers and is equal to 50% of eligible wages (up of $10,000) that the employer pays to every employee. To be eligible the employer must have suffered an entire or partial shutdown of business due to an official order that is related to COVID-19, or have experienced a substantial reduction in gross revenues.
The goal for this ERTC is to help employers keep their employees on their payroll during the COVID-19 epidemic. It is accessible for wages that are paid between the 13th of March, 2020 until December 31, 2020. Employers can claim the credit on their quarterly employment tax returns or on Form 941. For more information on how to claim the credit, please see the IRS guidance here: https://www.irs.gov/newsroom/employee-retention-credit-available-for-employers-affected-by-covid-19
What are the Qualifications for the Employee Retention Tax Credit?
The Employee Retention Tax Credit (ERTC) is the refunded tax credit for eligible employers that keep their employees in the course of the COVID-19 disease.
To be eligible for credit to be eligible, employers must:
1. Have been carrying on a trade or business during 2020.
2. Are experiencing a total or partial interruption of operations as a result of an order issued by the government in connection with COVID-19, or experienced an increase in gross revenues (defined below).
3. Make qualifying wages to certain eligible employees. Qualifying wages are generally defined as those paid for work performed in times of economic hardship.
4. Fill out Form 941, Employer`s Quarterly Federal Tax Return for each quarter during which they claim the credit and get an payroll tax deposit from their employer.
If an applicable large employer (ALE) has 100 or fewer fully-time employees (FTEs), all employee wages that are paid to the company are eligible to receive the credit, regardless of whether the employees are furloughed or working reduced hours. If the ALE exceeds 100 FTEs only employee wages that are paid to employees not providing any services because of the coronavirus pandemic qualify for the credit.
Employee Retention Tax Credit – What is the process?
The Employee Retention Tax Credit (ERTC) is an refundable tax credit for eligible employers that retain their employees during the COVID-19 epidemic. The credit is equal at 50% qualified salary (up up to $10,000) that the employer pays to every employee in 2020. Employers that qualify are those that are either completely or partially suspended due to an order from the government relating to COVID-19 or who have seen a dramatic reduction in gross revenues.
In order to claim this credit, companies must complete and submit Form 941-X, Claim for Refund of Excess Employment Taxes, along with their quarterly employment tax return. This credit can be claimed by filling out Line 1 of Form 941-X. For more information on claiming the credit, see IRS Notice 2020-22.
The ERTC is accessible for wages earned from March 13, 2020 to December 31, 2020.
What are the advantages of the Employee Retention Tax Credit?
The ERTC is available to businesses of all sizes who are operating a trade or business for the calendar year 2020 and experience an economic hardship as a consequence of the COVID-19 pandemic. To be eligible, an organization must have either completely or partially suspended operations in response to a government directive in connection with the COVID-19 pandemic or experience an increase in gross revenues.
Employers can claim the credit on wages earned from the 13th of March, 2020 through December 31 2020. This credit can be claimed by the quarterly tax return for employment (Form 941).
The ERTC is one of several tax relief measures taken in the United States by its federal counterparts to respond in the case of COVID-19. Others include tax deferral for payroll and expanded unemployment benefits.
Conclusion
The Employee Retention Tax Credit is a great way for businesses to retain their employees in challenging times. It`s a tax credit that businesses can claim for every employee they retain, which can be up of $5,000 each. It`s a tax credit can help businesses keep their most valued employees in difficult economic times, and also to ensure that the employees will remain for the long haul with the company.