Tips to Maximize the Employee Retention Tax Credit for Small Businesses

on February 01 at 04:10 PM

Although it has not yet received widespread recognition as such and in many cases is more significant than PPP was in 2020. the Employee Retention Tax Credit program is for many industries the single biggest opportunity for employers to receive the federal support they require in 2021.


What exactly is the Employee Retention Tax Credit (ERTC) and how can businesses determine if they are eligible? Here are some hints and information to help you decide if your business qualifies and tap into the full potential of ERTC to recover and expand as the pandemic persists:


Tips to Maximize the Employee Retention Tax Credit for Small Businesses


What does Employee Retention Tax Credit mean?


As part of Congress's response to the COVID-19 crisis, an incentive program called the Employee Retention Tax Credit was established. It is meant to give employers financial relief who had to continue paying employees despite having their operations affected by pandemic-related government orders. According to the CARES Act, the ERTC is a fully refundable payroll tax credit that entitles qualified businesses to a deduction of up to 70% of qualified wages paid per employee up to a maximum of $10,000 per quarter for the tax year 2021.


Can a Company Rely on ERTC and PPP?


The Paycheck Protection Program (PPP) and the ERTC program were both extended and improved by the Consolidated Appropriations Act of 2021. Now, businesses that received PPP loans are also eligible to apply for ERTC. Additionally, Congress removed a prohibition on dual support, enabling employers to claim both the PPP loan and the Employee Retention Tax Credit, with a look-back opportunity for companies that will be eligible for the ERTC in 2020.


How can I tell if my company qualifies?


Companies that experienced a significant decline in quarterly revenue, were forced to shut down completely or partially due to governmental orders, started a new trade or business, or had previously generated less than $1 million in average annual revenue, all qualify for the ERTC.


What Amount of Credit Can I Expect?


As of 2020, each employee can expect to receive up to $5,000 annually from the ERTC. By 2021, each employee could receive up to $7,000 per quarter.


Which Sectors Have Seen an Impact?


Any sector that suffered from the COVID-19 crisis. Health care, hospitality, retail, staffing, assisted living, and even many not-for-profit organizations are of particular importance.


What date does the Employee Retention Tax Credit expire?


The ERTC was scheduled to end on December 31st, 2022, but if Congress approved an amendment to the infrastructure bill, the program would end on September 30th. However, it is open-ended, so even after this time, businesses have up to three years from the date of employee retention credit file time for their employment tax return to submit their claim.

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