Small business owners can finally breathe a sigh of relief. The employee retention tax credit (ERTC) will be returning in 2022. This tax credit is specifically designed for small businesses that were negatively impacted by the COVID-19 pandemic. It’s an attempt to help business owners retain their employees and stay financially afloat during difficult times.
The ERTC is a refundable tax credit that reimburses employers for a percentage of wages paid to retained employees. The credit can be worth up to $7,000 per employee per quarter in 2022. It’s available to businesses that were either partially or fully shut down due to the pandemic or experienced significant declines in revenue. The ERTC also applies to wages paid by a business that received a Paycheck Protection Program (PPP) loan.
In 2020, the ERTC was available to businesses that experienced a decline in gross receipts of at least 50% compared to the same quarter in the previous year. However, in 2021 and now in 2022, businesses only need to show a decline in gross receipts of at least 20% to be eligible for the credit. This means more businesses will qualify for the credit, providing much-needed relief to small business owners.
The ERTC is a game-changer for small businesses that are struggling to stay afloat. It provides an incentive for business owners to retain their employees, which is crucial for the economy. When small businesses close their doors or lay off employees, it has a ripple effect on the entire community. By providing a tax credit for employee retention, the ERTC can help prevent small businesses from going under and keep people employed.
Business owners who are interested in taking advantage of the ERTC should speak with their tax professional. It’s important to ensure that all eligibility requirements are met, and that the credit is properly claimed on tax returns. The IRS has provided guidance and FAQs on the ERTC, but it can be complicated to navigate. Small business owners should seek expert advice to ensure they are getting the maximum benefit from this tax credit.
In conclusion, the return of the employee retention tax credit in 2022 is a welcome relief for small business owners. It provides financial assistance to businesses that have been negatively impacted by the pandemic and encourages the retention of employees. As the economy recovers, it’s important to support small businesses and help them get back on their feet. The ERTC is one way to do this and is something that small business owners should take advantage of in the coming year.