As the COVID-19 pandemic continues to wreak havoc on businesses of all sizes, the federal government has introduced measures to help companies stay afloat. One of those measures is the employee retention credit, and if you’re a business owner, it’s something you don’t want to miss out on.
The employee retention credit is a refundable tax credit that was introduced as part of the CARES Act in March 2020. It’s designed to help employers keep their employees on the payroll by providing financial assistance to cover wages and benefits.
Eligible employers can claim up to $5,000 per employee for wages paid between March 12, 2020, and January 1, 2021. The credit is equal to 50% of qualified wages up to a maximum of $10,000 per employee, meaning the maximum credit available per employee is $5,000.
To be eligible for the credit, businesses must have experienced one of two conditions:
1. A full or partial suspension of operations due to a government order related to COVID-19, or
2. A significant decline in gross receipts (50% or more) when compared to the same quarter in 2019.
If you meet either of these conditions, you may be able to claim the employee retention credit.
Claiming the credit is relatively straightforward, but there are some important things to keep in mind. First, you’ll need to determine your eligibility based on your operations and gross receipts in 2020. Second, you’ll need to calculate the credit based on the wages paid to each eligible employee.
To claim the credit, you’ll need to file Form 941 (Employer’s Quarterly Federal tax Return) with the IRS. This should be done as soon as possible to ensure you receive the credit in a timely manner.
It’s important to note that you can’t claim the employee retention credit if you’ve already received a loan under the Paycheck Protection Program (PPP). However, if you’ve been approved for a PPP loan but not yet received the funds, you may still be eligible for the credit.
In summary, the employee retention credit is a valuable resource for businesses struggling to keep their employees on the payroll during the pandemic. If you meet the eligibility requirements, don’t hesitate to claim the credit and take advantage of the financial assistance it provides.