The employee retention tax credit (ERTC) is a valuable and often overlooked tax incentive that can provide significant benefits for businesses looking to retain their employees.
The ERTC was created in response to the COVID-19 pandemic and is intended to help employers keep their employees on payroll, even if business has slowed down. The credit is available to businesses that have experienced a decline in revenue, and can provide up to $5,000 per employee, per quarter.
Here are some ways in which your business can get more value from the ERTC:
1. Evaluate Your Eligibility
To qualify for the ERTC, your business must have experienced a significant decline in revenue due to the pandemic. Specifically, you must have had at least a 50% decline in gross receipts compared to the same quarter in the prior year. Alternatively, if your business was shut down by a government order, you may qualify regardless of revenue loss. It’s important to evaluate your eligibility and work with a tax professional to ensure you meet the requirements.
2. Maximize Your Credits
The ERTC can be worth up to $5,000 per employee, per quarter, for a total of $28,000 per employee over the course of 2021. To maximize your credits, consider retaining as many employees as possible, and work with a tax professional to ensure you’re taking full advantage of the credit.
3. Review Your Payroll Practices
In order to claim the ERTC, you must continue to pay your employees during the quarter in which the credit is claimed. This means that if you reduced employee hours or pay in response to the pandemic, you may need to increase pay in order to claim the credit. Review your payroll practices and make adjustments as necessary to take advantage of the full credit.
4. Monitor Your Revenue
The ERTC is only available for businesses that have experienced a significant decline in revenue. It’s important to monitor your revenue closely throughout the year to ensure you meet the requirements for claiming the credit. Work with a financial advisor or tax professional to develop a strategy for maximizing your credits while also keeping your business financially stable.
In conclusion, the employee retention tax credit can be a valuable tool for businesses looking to retain their employees during the pandemic. By evaluating eligibility, maximizing credits, reviewing payroll practices, and monitoring revenue, businesses can get more value from this important tax incentive. Work with a tax professional or financial advisor to ensure you’re taking full advantage of the ERTC and keeping your business financially stable during these challenging times.