The employee retention tax credit (ERTC) program is a powerful incentive that can help boost your business. Available to many employers, this program allows businesses to receive up to $5,000 in tax credits per employee retained during the COVID-19 pandemic.
The credit was originally introduced as part of the CARES Act in 2020 to help businesses keep workers on payroll during the pandemic. In 2021, the program was expanded to include more businesses and higher credit amounts.
To take full advantage of the ERTC program to boost your business, here are some key steps to follow:
1. Determine if your business qualifies.
The ERTC program is available to businesses of all sizes, including those with 500 or fewer employees. To qualify, the business must have experienced a significant decline in gross receipts due to the COVID-19 pandemic or have been forced to shut down entirely.
2. Calculate the credit amount.
The credit amount for each employee retained is up to $5,000 for 2020 and up to $7,000 per employee retained for each quarter in 2021. The maximum credit amount available is up to $28,000 for each employee retained over the course of 2020 and 2021.
3. Keep accurate records.
To claim the ERTC credit, businesses must keep accurate records of all qualifying wages paid during the tax year. The credit is based on the total amount of qualified wages paid to employees during each quarter.
4. Claim the credit on your tax return.
To claim the ERTC credit, businesses must file Form 941, the quarterly tax return that reports wages paid and taxes withheld from employees. The credit can be taken as a refundable tax credit, meaning any excess credit can be refunded to the business.
By maximizing the benefits of the ERTC program, businesses can help ensure their employees remain on payroll and retain valuable talent. In addition to the financial benefits, the program can also help boost morale and increase productivity as employees feel secure in their jobs during a challenging time.
To learn more about the ERTC program and how it can benefit your business, reach out to a tax professional or visit the IRS website for more information.