employee retention credit: A Comprehensive Guide to its Current Availability
The employee retention credit (ERC) has been a significant relief effort for businesses during the COVID-19 pandemic. This credit was introduced as a part of the CARES Act in March 2020 and was later expanded and extended through various legislative acts.
The ERC is a refundable tax credit that allows eligible businesses to receive a credit for a portion of the wages paid to employees during the pandemic. The credit is aimed at encouraging businesses to keep employees on their payroll, even if they are not able to operate at full capacity.
As of the current availability, the ERC is still in effect and offers substantial benefits to eligible businesses. Here’s a comprehensive guide to its current availability.
Eligibility criteria: The ERC is available to businesses that experienced a significant decline in gross receipts or were subject to a full or partial suspension of operations due to government orders related to COVID-19. Eligible businesses include those with up to 500 employees and those that were not recipients of the Paycheck Protection Program (PPP) loans.
Amount of credit: The ERC allows businesses to claim a credit of up to 70% of qualified wages paid to employees, up to $10,000 per employee per quarter. This means that for each eligible employee, businesses can claim a maximum credit of $7,000 per quarter.
Changes in eligibility and credit amount: The ERC has undergone several changes in eligibility criteria and credit amount through legislative acts such as the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021. These changes have expanded the eligibility criteria and increased the credit amount, making it more beneficial for businesses.
Claiming the credit: Businesses can claim the ERC by filing Form 941, the Employer’s Quarterly Federal tax Return. For eligible businesses that already filed their quarterly tax returns without claiming the ERC, the IRS has provided guidance on how to amend their returns to take advantage of the credit.
Extended availability: The ERC was initially set to expire at the end of 2020, but it has been extended through 2021. This means that businesses can continue to take advantage of the credit for wages paid to employees throughout the year.
Considerations for businesses: As the ERC continues to be available, eligible businesses should carefully assess their eligibility and consider claiming the credit. It can provide valuable financial relief and support for businesses struggling to maintain their workforce during the ongoing challenges posed by the pandemic.
In conclusion, the employee retention credit is a valuable relief effort that provides financial support to businesses during the COVID-19 pandemic. With its current availability and expanded benefits, eligible businesses should take advantage of this credit to help retain their employees and navigate the economic uncertainties caused by the pandemic. It is important for businesses to stay informed about the latest updates and guidance from the IRS to ensure they are maximizing their benefits from the ERC.