On March 27, 2020, the federal government introduced the Employee Retention Tax Credit (ERTC) under the CARES Act to help businesses retain employees during the economic crisis caused by COVID-19.
It included the Payroll Protection Program (PPP) and the Employee Retention Tax Credit (ERTC).
The ERTC is a tax credit that provides businesses with a refundable tax credit per employee.
In 2021 the ERC increased to 70% of up to $10,000 in wages paid per employee per quarter for Q1, Q2, and Q3.
That is a potential of up to $21,000 per employee.
Let's take a closer look at how this tax credit works...
The ERTC is available for all employers in all industries that have been affected by the COVID-19 pandemic.
This includes businesses that had to close due to government orders, as well as those that experienced significant revenue losses.
To be eligible for the ERTC, employers must have either (1) had operations suspended due to a COVID-related shutdown order or (2) experienced a year-over-year decline in gross receipts of more than 20%.
Self-employed individuals are also eligible for the ERTC if they meet these criteria.
Startups may be eligible for up to $33,000.
How it Works
Employers can claim an amount equal to 70% of qualified wages up to $10,000 per employee per quarter for Q1, Q2, and Q3.
Qualified wages include health insurance costs and certain expenses related to providing leave under the Families First Coronavirus Response Act (FFCRA).
This means employers can receive up to $7,000 per employee if they provide paid family leave or sick leave under FFCRA.
Employers can receive an advance payment of their ERTC amount from their payroll provider or apply directly through their tax return.
If employers choose not to accept an advance payment from their payroll provider, then they will need to wait until filing their taxes to receive the credit.
The Employee Retention Tax Credit is an important tool for employers who are struggling financially because of COVID-19.
It helps them cover some of the costs associated with keeping employees on staff and providing them with benefits such as paid family leave or sick leave.
If employers meet the eligibility requirements and follow IRS guidelines when claiming this credit, they should be able to take full advantage of it without any issues.
For those interested in learning more about how this tax credit works, please consult with your accountant or financial advisor.
They should be able to provide you with additional information and guide you through the process step by step.
Urgent Notice: The time period that businesses can receive credits for is 2020 - 2021. However, businesses have 3 years from the end of 2021 to file. If they qualify in 2020 and 2021 they need to file by 4/15/2024 to get both years. If they don’t then they can only file for 2021, and they have to do that by 4/15/2025.