As businesses navigate the ongoing challenges brought on by the COVID-19 pandemic, employee retention has become a critical focus for many companies. Fortunately, the newly extended employee retention tax credit (ERTC) offers an opportunity for businesses to save money while keeping their workforce intact.
What is the employee retention tax credit?
The ERTC is a refundable tax credit designed to encourage businesses to retain employees during periods of economic uncertainty. Originally introduced as part of the CARES Act in 2020, the credit has since been extended and expanded under the Consolidated Appropriations Act of 2021.
How Does the ERTC Work?
Under the current legislation, eligible businesses can claim a tax credit of up to $28,000 per employee for wages paid between July 1, 2021, and December 31, 2021. The credit is equal to 70% of qualified wages paid during that time period, up to a maximum of $10,000 per employee per quarter.
To be eligible for the ERTC, businesses must meet one of two criteria:
– The business experienced a significant decline in gross receipts during any quarter in 2020 or 2021 compared to the same quarter in 2019.
– The business was subject to a full or partial suspension of operations due to a government order during any quarter in 2021.
Additionally, businesses with fewer than 500 employees can claim the credit for all employees, while larger businesses can only claim the credit for employees who are not providing services due to a full or partial suspension of operations or experiencing reduced hours.
Why is the ERTC Important?
Simply put, the ERTC can provide significant savings for businesses struggling to retain their employees in the current economic climate. By offering a tax credit of up to $28,000 per employee over a six-month period, the ERTC can ease the financial burden of payroll costs while allowing businesses to keep their teams intact.
As the pandemic continues to impact the economy, many businesses are facing significant financial challenges. The ERTC offers a lifeline to those struggling to retain their employees, allowing them to weather the storm and emerge stronger on the other side.
How Can Businesses Take Advantage of the ERTC?
To take advantage of the ERTC, eligible businesses should consult with their tax advisor or payroll provider to ensure they are properly claiming the credit. The credit can be claimed on quarterly payroll tax returns or by filing an amended payroll tax return for previous quarters.
In Conclusion
The employee retention tax credit offers a critical opportunity for businesses to save money while retaining their employees during a time of economic uncertainty. As businesses navigate the ongoing challenges of the pandemic, the ERTC offers a lifeline to those struggling to keep their teams intact. By consulting with their tax advisor or payroll provider, businesses can take advantage of this valuable credit and emerge stronger on the other side.