As a business owner, you are always looking for ways to save money and maximize your profits. One way to do that is by taking advantage of the employee retention tax credit (ERTC). This credit was introduced by the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help businesses retain their employees during the pandemic. However, the credit has now been extended and expanded to include more businesses, making it a valuable tool for saving money.
What is the employee retention tax credit?
The ERTC is a refundable tax credit that is designed to help businesses keep their employees on the payroll during times of economic hardship, such as the COVID-19 pandemic. The credit is equal to 50% of qualifying wages up to $10,000 per employee, which means that the maximum credit per employee is $5,000.
To qualify for the credit, your business must meet one of two criteria:
– It was fully or partially suspended due to government orders related to COVID-19.
– It experienced a significant decline in gross receipts (more than 50%) during any calendar quarter in 2020 compared to the same quarter in 2019. For 2021, the threshold for significant decline in gross receipts has been lowered to 20%.
Which Businesses Can Take Advantage of the employee retention tax credit?
Originally, only businesses with fewer than 100 employees could take advantage of the ERTC. However, the credit has now been expanded to include businesses with up to 500 employees.
Additionally, the credit is now available to businesses that received a Paycheck Protection Program (PPP) loan. Previously, businesses that received a PPP loan were not eligible for the ERTC. However, the Consolidated Appropriations Act, 2021 has made changes to the ERTC, making it available to businesses that received a PPP loan.
How Can You Maximize Your Savings with the employee retention tax credit?
To maximize your savings with the ERTC, there are several steps you can take:
– Determine if your business is eligible for the credit: Review the eligibility criteria and determine if your business meets the requirements. Consult with your tax advisor for guidance.
– Review your payroll records: Review your payroll records to determine which employees qualify for the credit. Qualified wages include wages paid from March 13, 2020, through December 31, 2020, and January 1, 2021, through December 31, 2021.
– Calculate your credit: Calculate your credit based on the eligible wages for each employee. Remember, the maximum credit per employee is $5,000.
– Claim your credit: Claim your credit on your quarterly payroll tax return.
Conclusion
The employee retention tax credit is a valuable tool for businesses looking to save money and retain their employees. The credit has been extended and expanded, making it available to more businesses than ever before. By understanding the eligibility criteria and taking the necessary steps to maximize your savings, you can take advantage of this valuable tax credit and improve your bottom line. Contact your tax advisor to learn more about the ERTC and how it can benefit your business.