As a business owner, maximizing your savings is an essential part of managing and growing your business. And one way to do that is by taking advantage of the employee retention tax credit.
The employee retention tax credit is a refundable tax credit that was introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It is designed to encourage businesses to retain their employees during the COVID-19 pandemic.
The employee retention tax credit can be claimed by eligible employers who have experienced a significant decline in gross receipts or who have been forced to fully or partially suspend their operations due to government-mandated restrictions. The credit is equal to 50% of qualified wages paid to employees between March 13, 2020, and December 31, 2021.
To be eligible for the employee retention tax credit, businesses must meet certain criteria. They must have either:
– Experienced a significant decline in gross receipts; or
– Been fully or partially suspended as a result of government-mandated COVID-19 restrictions.
If you meet these criteria, you can claim the employee retention tax credit for each quarter in which you meet the eligibility requirements. The amount of the credit is equal to 50% of qualified wages paid to employees during the quarter, up to a maximum of $10,000 per employee per quarter.
To claim the employee retention tax credit, you will need to file IRS Form 941, Employer’s Quarterly Federal tax Return. This form will allow you to calculate the amount of the credit and claim it as a refundable tax credit.
There are a few things you should keep in mind when claiming the employee retention tax credit. First, you cannot claim the credit for the same wages that you used to claim the Paycheck Protection Program (PPP) loan forgiveness. Second, you cannot claim the credit for wages that are paid using the Families First Coronavirus Response Act (FFCRA) paid leave credits. Finally, you cannot claim the credit for wages paid to yourself or to family members who own more than 50% of the business.
In summary, the employee retention tax credit can be an excellent way for eligible businesses to maximize their savings during the COVID-19 pandemic. By retaining your employees and claiming the credit, you can reduce your tax liability and save money that you can put back into your business to help it grow and thrive. Speak with your tax professional to see if your business is eligible for this credit or to get assistance with filing.