The Employee Retention Tax Credit is a US stimulus that helped companies who were negatively impacted by COVID-19 shutdowns. Because employees are the backbone of every organization and the most valuable asset for any business, the stimulus was designed specifically to help companies retain their employees and even continue to hire in the aftermath of the pandemic. The good news is that businesses who were not able to previously take advantage of this credit, may still be able to retroactively claim the credit if they qualify. Not sure if you qualify for the tax credit? Check out ERTC services from a reputable provider.
What is Employee Retention Tax Credit (ERTC)?
The Employee Retention tax credit was initially a part of the CARES act, passed in March 2020, to support businesses significantly impacted by the pandemic. The tax credit reduced payroll taxes employers were required to pay on employees.
While this tax credit was available to all businesses during the last three quarters of 2020 and through most of 2021, businesses can still amend their tax filings for those periods to retroactively claim the credit until 2025. The amount of money you can claim may vary depending on a variety of factors but can result in tens of thousands of dollars in tax credits to your business (up to $26,000 per employee).
What are the Qualifications to Avail the Employee Retention Tax Credit (ERTC)?
To qualify for ERTC services, you must meet two main criteria:
1) Your business must have been partially or fully shut down by government order due to COVID-19.
You are eligible for the tax credit if your business was partially or fully suspended by government order due to COVID-19. Or…
2) Your business gross receipts declined significantly during the pandemic.
If you paid employment taxes while the pandemic adversely affected your business’ bottom line, you may also be eligible. Eligibility is assessed on a quarter by quarter basis. Furthermore, a business’ eligibility is based on the exact impact the pandemic had on the business’ quarterly gross receipts. (See Internal Revenue Code section 448(c) for a definition of “gross receipts” applicable to businesses, and Section 6033 for a definition of “gross receipts” for non-profit organizations.)
Broadly speaking, in 2020, quarterly receipts had to be down by at least 50% as compared to the equivalent quarter of 2019. In 2021, quarterly receipts had to be down by at least 20% as compared to the equivalent quarter of 2019.
ERTC was a valuable tool for businesses during the pandemic to weather the storm. And, it continues to be a valuable tool retroactively, for those that qualify, to get their businesses back on the right track after the pandemic.
If you think you may qualify for the credits, it is well worth the time to reach out to an ERTC service provider to confirm your eligibility, qualify eligible wages, document applicable calculations, get the help you need to amend your returns by creating and filing a form 941-X.