The employee retention tax credit (ERTC) is an essential program that aims to help small business owners who have suffered significant losses due to the COVID-19 pandemic. If you are running a small business and are eligible for this program, it is essential to make the most of it. Here are some of the ways to maximize the benefits of the ERTC for small business owners.
Understand the Eligibility Criteria
The first step towards maximizing the benefits of ERTC for small business owners is to understand the eligibility criteria. The ERTC is available to those businesses that have experienced a decline in revenues, either partially or wholly due to the pandemic. There are two components of eligibility; the gross receipts test and the government order test. You need to understand these eligibility criteria, and if you are eligible, you can claim for the ERTC.
Calculate the Maximum credit Amount
The second step towards maximizing the benefits of ERTC for small business owners is to calculate the maximum credit amount that you are eligible for. For instance, the maximum credit amount is 50% of the qualified wages paid to each employee up to a maximum of $10,000 in qualified wages per employee. Therefore, you need to calculate the numbers of eligible employees and their qualified wages to determine the maximum credit amount.
Claim for the Recovery Startup Business credit
The ERTC for small business owners also includes the Recovery Startup Business credit. This program is designed for new businesses that have started after February 15, 2020, and have average annual gross receipts of less than $1 million. Eligible businesses can claim up to $50,000 in tax credits, allowing them to offset their payroll taxes.
Coordinate with Your Payroll Service Provider
Small businesses are usually overwhelmed with the tax filing process. Therefore, it would be best to hire a payroll service provider that can take care of the entire process for you. It is essential to ensure that your payroll service provider understands the ERTC and can accurately calculate your credits.
Maximizing the benefits of ERTC for small business owners is vital to keep the business afloat amid the pandemic. By understanding the eligibility criteria, calculating the maximum credit amount, claiming for the Recovery Startup Business credit, and coordinating with your payroll service provider, you can maximize the benefits of ERTC for your business.