As a result of the CARES act, the federal program known as the Employee Retention Tax Credit, or ERC or ERTC fund, was established. It was made to make it easier for employers and companies to keep their workers on the payroll. ERTC funds allowed workers in all sectors to continue receiving pay and benefits.
From March 13, 2020, to September 30, 2021, the program was offered. Employers may now apply for this credit retroactively for up to three years as a result of the Infrastructure Investment and Jobs Act!
Sadly, the majority of COVID-19 pandemic-related programs came to an end in 2020 or 2021. Fortunately, the Infrastructure Investment and Jobs Act allows qualified businesses to apply for this credit retroactively for up to three years!
Are you unsure if your company meets the requirements for the ERC? Are you interested in applying for this credit but unsure if the deadline has passed?
Determine your eligibility
Making sure your business is eligible is the first step in receiving ERTC funding. To qualify for ERC funding, you must meet these three requirements:
The operations of your company were suspended: Your company’s performance during the initial COVID period serves as the primary requirement that you must satisfy. You might be eligible if a government order completely or partially shut down your business. Examples of partial closures include being unable to operate on particular days or having to shorten business hours to comply with the law.
Gross revenue declines: Companies that don’t meet the first requirement but have a significant decline in quarterly gross revenue are still eligible for the ERTC fund program. You must be able to contrast your quarterly revenue decline with 2019. For instance, you must demonstrate a 50% decrease from 2019 to 2020. And you must demonstrate a 20% decline from 2019 in order to be eligible for 2021.
Businesses in recovery: ERTC only applies to the third and fourth quarters of 2021 for startups in recovery. The company had to start operating or open its doors after February 15, 2020, in order to be eligible.
Find out how to compute the ERC
The ERC credit for 2020 is roughly equal to 50% of the qualified wages of your employee. For the entire year, a qualified business may deduct up to $10,000 in healthcare and wages for each employee. For 2020, the annual credit cap is $5,000 per employee. ERTC funding is available for all employees receiving wages in 2020 for businesses with fewer than 100 full-time employees in 2019.
The credits for the ERTC program in 2021 differ from those in 2020. Credits are based on 70% of corresponding wages. Each eligible employee may submit claims totaling up to $10,000 per quarter.
The maximum credit for 2021 is $7,000 per employee per quarter. For the first three quarters of the fiscal year, businesses can deduct up to $21,000 per employee from their ERC, which is the main change between the ERC in 2020 and 2021. Additionally, the ERC will only be applicable to you if you had fewer than 500 full-time employees in 2019 and all eligible workers who received wages in 2021.
Recognize What a Qualified Wage Is
Pay that is qualified goes beyond basic pay. Your full-time and part-time employees’ salaries as well as any health plan costs that you incur on their behalf are both eligible. Typically, it consists of both pre-tax contributions from the employee and contributions from the employer. Your employee’s health plan after-tax contributions are not taken into consideration.
What does Employee Retention Credit Time mean?
As part of the COVID-19 relief efforts, eligible employers may be eligible for the Employee Retention Credit (ERC), a tax credit. It is intended to assist employers in keeping their workers on the payroll throughout the pandemic. The credit is now extended to cover wages paid from March 13, 2020, through December 31, 2022. So that we can wait for employee retention credit. A percentage of each employee’s wages up to a maximum amount per employee per quarter makes up the credit amount. Depending on the number of employees and the total amount of wages paid, different percentages and maximum amounts apply.
