How to Apply For The Employee Retention Tax Credit (ERTC) for Your Business
A tax credit for employers’ equivalent to 50% of the qualified salary (including eligible health plan expenditures) that qualified businesses pay their employees is known as the Employee Retention Tax Credit (ERTC).
The ERTC is a tax credit provided to businesses to cover the expense of maintaining staff during COVID-19. The credit is equivalent to 20% of each worker’s eligible wages, capped up to a total of $10,000 per employee, per quarter with a maximum of $26,000 total potential refund, per employee. To be eligible for the credit, an employer’s quarterly gross receipts must have decreased by at least 50 percent as compared to the same quarter of the previous year. The credit applies to wages received between March 13, 2020 and December 31, 2020.
How can you get your Employee Retention Tax Credit?
In order to receive the ERTC refund, businesses must categorize their quarterly tax payments, including the total amount of qualifying earnings, including health insurance costs for those employees. The business will offset its Social Security tax liability by the amount of this refundable credit.
You are not subject to any penalties if you decide to hold on to the taxable value of payroll taxes up to the number of the ERTC instead of paying it prior to getting the credit. This is an option that is available to you. Employers that meet the requirements but have less than 500 full-time workers are also able to use IRS Form 7200 to make a request for early payment of the ERTC. You will not be entitled to receive an advanceable ERTC payment if you work for a business with more than 500 employees.
Even though the ERTC officially ceased on October 1st, 2021, companies can still apply for a subsequent ERTC return by filing Form 941-X retroactively. Within 3 years of the initial return or within two years of the business paying the tax, you can file this form to make corrections to your employment taxes.
So, based on that when they initially filed or paid their company taxes, qualified businesses that did not initially reclaim their ERTC could possibly do so until 2024. It’s important for businesses to remember that this reimbursement is only valid again for 2020 tax year and the first three quarters of the 2021 tax year. Applied for the tax year of 2020, and the first three (of four) quarters of the 2021 tax year, employers are eligible for a retroactive refund; however, this does not apply to the fourth quarter of 2021 or the 2022 tax year or later.
The Employee Retention Tax Credit can be a valuable tool for employers who are struggling to keep their businesses afloat during these difficult times. The credit can help offset the costs of retaining employees and keeping them on the payroll. For employers who have experienced a significant decrease in business, the credit can provide much-needed financial relief. The US Government has allocated billions of dollars for this program, and there’s no cost to apply, so it’s a great time to take advantage of this before it ends or the funds run out. Complete the Quick Application Form Here.