As businesses continue to face the economic impact of the ongoing COVID-19 pandemic, the employee retention credit (ERC) has been a lifeline for many employers. This tax credit is designed to encourage businesses to retain their employees, even in the face of financial hardships.
Since its introduction as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, the ERC has undergone several updates and expansions, providing increased relief opportunities for eligible employers. Stay updated on the latest developments to maximize your benefits and ensure you receive the refund you deserve.
Expansion under the Consolidated Appropriations Act (CAA)
The CAA, enacted in December 2020, brought significant changes to the ERC. Most notably, it opened up the opportunity for businesses to claim both the Paycheck Protection Program (PPP) loan and the ERC, which was previously prohibited. This expansion provided much-needed relief for struggling employers.
The CAA also extended the availability of the ERC until June 30, 2021. Initially, the ERC was only applicable for wages paid between March 13 and December 31, 2020. The extension allows businesses to continue benefiting from the credit throughout the first half of 2021.
Important Updates from the American Rescue Plan Act (ARPA)
In March 2021, the ARPA further enhanced the ERC to provide additional relief to eligible employers. While the full details are still emerging, it’s crucial to stay updated on the latest developments to ensure you can take advantage of all available benefits.
One significant change introduced by the ARPA is the extension of the ERC availability until December 31, 2021. This means that eligible employers can continue to claim the credit for wages paid throughout the year, providing much-needed support as businesses work towards recovery.
Additionally, the ARPA expands the eligibility criteria for the ERC. Previously, employers with more than 100 full-time employees were ineligible if they did not experience a significant decline in gross receipts. However, the ARPA removes this limitation, allowing larger employers to qualify as long as they meet the other requirements.
Tracking and Claiming the ERC Refund
To claim the ERC refund, eligible employers need to carefully track and document the qualified wages and health plan expenses related to the credit. It’s essential to maintain accurate records to support the calculation of the credit amount and ensure compliance with IRS guidelines.
Qualified wages are limited to a maximum of $10,000 per employee per quarter, including allocable health plan expenses. The credit amount is calculated as 70% of qualified wages for each calendar quarter, with a maximum credit of $7,000 per employee per quarter.
Given the complexity of the ERC requirements and the evolving updates, consulting with a knowledgeable tax professional is highly recommended. They can guide employers through the process, ensuring accurate calculations and maximizing the benefits.
Staying Informed and Reaping the Benefits
The ERC has proven to be a crucial lifeline for businesses during these challenging times. By staying informed about the latest updates, employers can take full advantage of the available relief opportunities and maximize their chances of receiving a refund.
Regularly checking official government websites, such as the Internal Revenue Service (IRS) and the United States Department of the Treasury, can provide the most up-to-date information. Additionally, subscribing to newsletters and alerts from reputable tax and accounting organizations will keep you informed on any developments that may impact your eligibility or claim.
Remember, the ERC refund offers crucial financial support to struggling businesses, allowing them to keep their workforce intact and navigate through uncertain times. Stay updated, consult a tax professional, and ensure you take full advantage of this valuable opportunity.