Small business owners have been facing unprecedented challenges since the outbreak of COVID-19. With revenue dwindling and operational costs skyrocketing, many businesses have struggled to keep their doors open. Fortunately, Congress has introduced the employee retention tax credit to help businesses keep their employees on the payroll. And now, with the latest update to the program, small business owners have even more reason to rejoice.
The employee retention tax credit is a program that was introduced as part of the CARES Act to help businesses weather the storm of the pandemic. The program provides a tax credit to eligible employers for a portion of their employee‘s wages, up to a certain limit. The program was originally set to expire at the end of 2020, but Congress extended it through the first half of 2021.
The latest update to the program expands the credit even further. Under the new provision, businesses that received a Paycheck Protection Program (PPP) loan are now eligible for the tax credit. Previously, businesses that received a PPP loan were not eligible for the credit, but this update will allow them to take advantage of both programs.
The new provision also increases the maximum credit amount from $5,000 per employee to $14,000 per employee. This means that businesses can now receive a credit of up to $28,000 per employee for the first two quarters of 2021. Furthermore, the program now allows eligible employers to claim the credit for up to 70% of the employee‘s wages, up from 50% in 2020.
Small business owners should take note of this update and make sure that they are taking advantage of the program. The tax credit can help businesses offset the cost of keeping their employees on the payroll during a time when revenue may be significantly reduced. It can also help businesses save money on their tax bill, which can free up cash flow for other essential business expenses.
To qualify for the tax credit, businesses must either have experienced a significant decline in revenue or have been subject to a government order to fully or partially suspend their operations. They must also have retained their employees during the quarter for which the credit is claimed.
In conclusion, the employee retention tax credit is an essential program that small business owners should take advantage of. With the latest updates to the program, eligible businesses can now claim even more credits to keep their employees on the payroll. We encourage small business owners to consult with their tax advisor to determine their eligibility and take advantage of this important program.