Did you know that you might still qualify for the Employee Retention Credit? Find out what it is and whether you qualify in this helpful post.
Simply put, the Employee Retention Credit, or more commonly referred to as ERC, is a payroll tax credit to business owners for their efforts to keep their employees on payroll during the pandemic.
ERC was introduced by the CARES ACT in 2020, expanded under the Consolidated Appropriations Act of 2021 (CAA), and later extended under the America Rescue Plan Act of 2021 (ARPA). The Employee Retention Credit is one of the most lucrative relief programs owners can take advantage of as we work towards leaving this pandemic behind us.
If your business operations were either fully or partially suspended due to a COVID-19-related governmental order, or if you experienced a significant reduction in gross receipts, you may qualify for the employee retention credit. This credit is available to essential and non-essential businesses in any industry and can be claimed through the end of 2021.
Recently, the ERC rate increased from 50% to 70% of qualified wages and the limit on per-employee wages increased from $10,000 for the year to $10,000 per quarter. This means you could be eligible to receive $5,000 per employee for 2020, and $7,000 per employee, per quarter, for 2021. That is a significant sum for certain businesses.
Employers that received a Paycheck Protection Program (PPP) loan, but were previously prohibited from claiming the ERC, may now qualify and can retroactively claim the ERC for 2020—but you can’t double-dip, so to speak. You’ll need to clarify which wages were covered by PPP and which wages are being applied to the credit.
Due to the complexity of the program and the rule changes between 2020 and 2021, it is highly recommended that you work with an expert to claim the credit on your employment taxes. If you’ve already filed your tax returns for 2020, don’t worry—you can still go back and claim the credit. Contact us today and together we can discuss your options.