ERTC Retroactive Filing and How Your Business Can Benefit Now
Are you trying to determine if your company is eligible for the Employee Retention Tax Credit but thought the deadline may have passed?
Like most programs created in response to the COVID-19 pandemic were stopped in 2020 or 2021. Fortunately, qualifying businesses can apply for this credit ERTC retroactively because of the Infrastructure Investment and Jobs Act.
If you own a business, you know how important every dollar is. Therefore, taking advantage of government tax incentives like an Employee Retention Tax Credit is essential!
Continue reading below to find out more about ERTC financing.
What makes the application for the employee retention tax credit crucial?
The Employee Retention Credit was a part of the Congress-passed Coronavirus Aid, Relief and Economic Security Act. Its goal was to motivate employers and workers to continue working throughout the Coronavirus outbreak. The credit was only valid for wages paid from March 13, 2020, through December 31, 2020, and was capped at $10,000 per person.
The percentage of qualified wages has since been raised, reaching 70% for 2021. In addition, the maximum wages per employee were raised from $10,000 to $10,000 annually to $10,000 each quarter. However, during particular intervals in 2020 or 2021, businesses with less than 100 employees and others with 500 or fewer employees are subjected to separate regulations.
The employer must also have kept those employees on staff and paid them at least $600 in qualifying pay during the appropriate time. Hourly or salary pay, commissions, and other forms of payment are acceptable wages.
The distinction is good for 50% of the qualified salaries paid to employees by the business. The total amount of eligible earnings per employee is dollar 10,000, and the highest credit an employer can get is $5,000 per employee.
Important Updates To The ERTC
New, more relaxed requirements for being considered as “qualified businesses” including it being more open to all different sized businesses (in terms of number of employees employed). The IRS considers several different criteria to decide whether a private company or tax-exempt organization qualifies for the tax credit.
Since the ERTC was announced in 2020, these elements have evolved.
The criteria now utilized to establish ERTC eligibility are as follows:
● A suspension of all or some economic activity during 2020 and 2021 as just a result of federal directives from COVID-19.
● A drop in gross sales between the same quarterly in 2019 to the comparable quarter in 2020 or 2021 of much more than 20%.
● Recover startup enterprises have recently opened and estimated yearly revenues of $1 million or less.
Initially, the CARES Act did not grant ERTC eligibility to Paycheck Protection Program (PPP) loan beneficiaries. However, due to the adjustment of this exclusion, starting on March 12, 2020, companies that obtained PPP loans can also be eligible for the ERTC. The amount that businesses can claim has changed. The “qualified wages” of a qualified business determine the amount of the credit.
Companies with 100+ employees used only to include salary paid when COVID-19 made it impossible for them to provide services. Any qualifying business with fewer than 500 employees can now consider all employee earnings to be qualified again for credit, independent of whether they are regularly working or are subject to a shutdown order due to a change made by the CAA (CARES Act).
The eligible salaries of employees may also include any health benefits paid for by the business. The specific dollar credit amount has also changed since the ERTC was first implemented. The credit was raised from 50% of the eligible salaries received during the calendar quarter, to 70% due to the Taxpayer Certainty and Disaster Tax Relief Act of 2020.
Employers who meet the requirements may deduct that 70% from per cent eligible wages up to a $10,000 cap per quarter. Therefore, companies are qualified for a max credit of $7,000 per employee each quarter, or $28,000 total, for the entire four-quarter period. However, PPP loan recipients’ enterprises can only obtain a max credit of $5,000 for each employee.
How To File an ERTC Claim For Your Business
To be eligible for the credit, all qualified employers must report their total suitable salary and the related health insurance costs on their quarterly employment tax filings. Most employers must complete Form 941 and submit the necessary quarterly data. Employers can still claim their ERTC by filing retroactively with Form 941-X, along with the Adjusted Employer’s Quarterly Federal Tax Return and/or Claim for Refund, specifying wage info for every quality they paid qualifying wages for.
Employers may file Form 941-X up to three years after the original payroll taxes were due, which is typically on April 15. Thus, employers may claim the 2020 ERTC up to l April 15, 2024, and the for the 2021 ERTC up to April 15, 2025. Companies who might have missed previous opportunities to get the ERTC qualifications 2022 are also now in luck.
Eligible businesses may retroactively file an ERTC claim on qualified salaries paid for prior quarters within the ERTC schedule. To make up for that lost opportunity, employers must file Form 941-X with an adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. While the deadline has fortunately been extended, it’s advised to gather all required documentation and submit it to the IRS as soon as possible while funds are still available.
The earlier a company provides this documentation, the quicker it will get ERTC funds, given that processing, durations range from 30 to 60 days. This fast filing requirement specifically relates to Form 941-X. Although the IRS expects to process ERTC retroactive claims within 90 to 120 days, there could be significant delays as it works through its backlog of 941-X files.
Conclusion – Prepare your business for ERTC
It’s less complicated now than in the past to qualify for the ERTC for the tax year 2021, but it still requires a lot of work. Employers must still sort through a ton of payroll data to determine their eligibility and then compile and complete additional paperwork to claim those a potentially significant refund.
To ensure your business gets the maximum refund available as quickly as possible, and the IRS filings are done right, trust our expert CPA team to handle your claim – with no upfront costs to apply. -> ERTC Quick Apply Form