As a business owner, you know how important it is to retain your employees. Your team is the backbone of your success, and it’s crucial to keep them happy and engaged in their work. But did you know that there’s a tax credit available for businesses that retain employees during difficult times like the COVID-19 pandemic?
The employee retention tax credit (ERTC) was introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. The credit is designed to provide financial relief to companies experiencing economic hardship due to the pandemic, encouraging employers to retain their employees rather than laying them off.
The ERTC provides a refundable tax credit of up to $5,000 per employee for eligible businesses. This means that even if your business didn’t pay any payroll taxes, you could receive a refund of up to $5,000 per employee if you meet the eligibility criteria.
So, who’s eligible for this tax credit? First and foremost, businesses that had to fully or partially suspend operations due to government orders related to COVID-19 or experienced a significant decline in revenue in 2020 compared to the same period in 2019 are eligible.
Additionally, to qualify for the credit, businesses must:
– Have had an average of 500 or fewer employees in 2019
– Continue to pay employee wages and health benefits during the period of the credit (the credit is available for wages paid from March 13, 2020, through December 31, 2021)
– Meet other criteria outlined by the IRS
It’s essential to note that you cannot claim the ERTC if you also received a Paycheck Protection Program (PPP) loan. However, if you did not receive a PPP loan, you may be eligible for both the ERTC and other COVID-related tax credits, such as the credit for Sick and Family Leave or the Work Opportunity tax credit.
To claim the ERTC, you will need to file Form 941, the employer’s quarterly federal tax return. Additionally, there are other forms and documentation required to prove eligibility and calculate the credit, so it’s essential to consult with a tax professional to ensure that you’re following the right procedures.
In conclusion, the employee retention tax credit is an excellent opportunity for eligible businesses to receive financial relief while retaining their valuable employees during the pandemic. If you’re a business owner who had to suspend operations or experienced a significant decline in revenue during 2020, be sure not to miss out on this credit. Contact a tax professional today to learn more about eligibility and claim the credit on your tax returns.