As a business owner, you know that every dollar counts. That’s why it’s essential to take advantage of every tax savings opportunity available, including the employee retention tax credit (ERTC).
The ERTC is a tax credit available to businesses that were impacted by the COVID-19 pandemic. The credit can be worth up to $28,000 per employee and can be used to offset payroll taxes. To be eligible, businesses must have experienced a significant decline in gross receipts or been fully or partially shut down due to government orders.
Navigating the ERTC application process can be complicated, but it’s worth the effort. Here are some expert tips to help you ensure that you don’t miss out on valuable tax savings.
1. Understand the Eligibility Requirements
To qualify for the ERTC, businesses must meet specific eligibility requirements. One of the most crucial requirements is demonstrating a significant decline in gross receipts. An eligible employer must show a decline of at least 20% in gross receipts in a calendar quarter in comparison to the same quarter in 2019.
The other eligibility requirement is being impacted by government orders related to the COVID-19 pandemic. This can include being fully or partially shut down due to government orders or experiencing a significant decline in business because of COVID-19.
2. Keep Accurate Records
Keeping accurate records is essential when applying for the ERTC. You will need to provide documentation, such as gross receipts, employee wages, and employer-paid health coverage, to support your application.
It’s essential to keep detailed records and document any changes in your business operations or government orders that impacted your eligibility. This will not only help with your ERTC application but can also be beneficial if you face an audit.
3. Consult with tax Professionals
The ERTC is a complex tax credit, and navigating the application process can be challenging. That’s why it’s crucial to consult with tax professionals who are experienced in applying for and claiming tax credits.
They can help you ensure that you meet all the eligibility requirements and that you have accurate and complete documentation to support your application.
4. Apply for the credit
To apply for the ERTC, you will need to complete Form 941, which is your quarterly tax return. If you are eligible for the credit, you can claim it on Line 11c of Form 941.
If you have missed claiming the credit in previous quarters, you can file Form 941-X to correct your previous filing and claim the missed credits.
Conclusion
The employee retention tax credit is a valuable tax savings opportunity for businesses impacted by the COVID-19 pandemic. By understanding the eligibility requirements, keeping accurate records, consulting with tax professionals, and applying for the credit, you can ensure that you don’t miss out on the tax savings that you are entitled to.