employee retention tax credit (ERTC) was introduced by the U.S. government as an incentive to encourage employers to retain their employees during the COVID-19 pandemic, and it has since been extended into Q3 2021. The ERTC is a valuable tool for businesses looking to save on their taxes and retain their workforce. In this article, we will discuss ways businesses can maximize the ERTC in Q3 2021.
Firstly, it is important to understand the eligibility criteria for the ERTC. Businesses can qualify if they were fully or partially suspended during any qualifying quarter due to government orders related to COVID-19 or if their gross receipts fell by more than 20% compared to the same quarter in the previous year. Businesses can claim up to $7,000 per employee per quarter for Q3 2021.
To maximize the ERTC, businesses can consider the following strategies:
1. Review employee Eligibility
Employers can claim the ERTC for all eligible employees, including full-time and part-time employees, under the CARES Act. Employers should consider reviewing their employee records and identifying qualified employees who are eligible for the credit.
2. Review Payroll Records
To calculate the ERTC, businesses should review their payroll records and calculate the qualified wages for each employee. Qualified wages must be between March 13, 2020, and December 31, 2021, and may include expenses such as health benefits, sick leave, and vacation pay.
3. Explore the Relationship between PPP Loan and ERTC
Businesses who received PPP loans are eligible for the ERTC, but they cannot claim the credit on wages that were paid for with PPP funds. Employers can carefully review and determine which expenses can be claimed as qualified wages while also considering PPP loan deadlines.
4. Utilize Third-Party Service Providers
Businesses can benefit from using third-party service providers who can efficiently manage the payroll documentation required to claim the ERTC. The service providers can also evaluate the business’s eligibility status and determine the maximum credit available to them.
5. Monitor Changes in Legislation
ERTC guidance can change as issues arise. Businesses can stay informed of any changes as they are announced and adjust their ERTC claims accordingly.
Maximizing the ERTC in Q3 is about taking the time to assess your business’s eligibility criteria, payroll, and relationship with PPP loans. It is also important to stay abreast of any changes in legislation that may affect your business’s eligibility status. By leveraging the strategies we have discussed, businesses can benefit from the ERTC and save on their taxes while retaining their workforce.