As businesses continue to recover from the economic impact of the pandemic, it’s crucial for employers to take advantage of every resource available to them. One such resource that many employers may not be aware of is the employee retention tax credit (ERTC).
The ERTC is a tax credit introduced by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. The credit is designed to incentivize employers to keep their employees on payroll by providing them with a tax credit of up to $28,000 per employee.
While the ERTC was initially only available for businesses that experienced a significant decline in gross receipts or were subject to a full or partial shutdown due to COVID-19, recent changes to the laws have expanded eligibility to include more businesses.
One significant change to the ERTC is that it now applies to businesses that have experienced a decline in gross receipts of at least 20% in any quarter during 2021 compared to the same quarter in 2019. This means that even if your business was not impacted by a full or partial shutdown or a decline in revenue in 2020, you may still be eligible for the ERTC in 2021.
Another change to the ERTC is that it’s now available for businesses with up to 500 employees, up from the previous 100-employee threshold. This means that small and mid-sized businesses can take advantage of this tax credit to help offset the costs of retaining employees.
Employers can claim the credit on their quarterly payroll tax returns and can either use the credit to offset their payroll tax liability or request a refund for the credit. The ERTC can be claimed for qualified wages paid from January 1, 2021, through December 31, 2021.
It’s essential for employers to take advantage of this tax credit as it can provide significant savings and help mitigate the impact of the pandemic on their business. However, it’s crucial to understand the eligibility requirements and properly document your business’s qualification.
To ensure you’re taking advantage of the ERTC correctly, you should consult with a tax professional who can help you navigate the intricacies of the tax credit and maximize your benefits.
In conclusion, the employee retention tax credit is an essential tool for employers in Q3 2021, and it’s worth exploring whether your business is eligible to claim the tax credit. As businesses continue to recover from the pandemic’s impact, the ERTC can provide much-needed relief to retain and support your employees.