As a business owner, it is essential to be aware of the different tax savings strategies you can take advantage of to maximize your business’s profitability. One of the most exciting opportunities for businesses in 2021 is the employee retention credit (ERC).
The ERC was created as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020 to encourage businesses to keep employees on their payroll during the COVID-19 pandemic. If your business meets certain requirements, you may be eligible to receive a tax credit of up to $7,000 per employee per quarter, which can be a significant tax savings for your business.
To qualify for the ERC, your business must have experienced a significant decline in gross receipts or had operations partially or fully suspended due to a government order. If you meet these criteria, you can claim the credit for up to 70% of the first $10,000 in wages and health care costs paid to each eligible employee from January 1, 2021, through December 31, 2021.
One of the most significant advantages of the ERC is that it is refundable, meaning that if the credit exceeds your business’s tax liability, you can receive the remaining amount as a cash refund. This can be an excellent option for businesses struggling with cash flow during the pandemic.
To maximize your business’s tax savings with the ERC, you will need to carefully review the eligibility requirements and calculate the credit amount accurately. Working with a tax professional can help you ensure that you are claiming the credit correctly and taking advantage of all available savings opportunities.
In addition to the ERC, there are other tax savings strategies that businesses can explore, such as deductions for qualified business expenses and the Work Opportunity tax credit (WOTC) for hiring eligible employees. It’s crucial for businesses to stay informed about tax law changes and to work closely with tax professionals to identify the best tax savings strategies for their unique needs.
In conclusion, the employee retention credit is an exciting opportunity for businesses to save on their taxes in 2021. By carefully reviewing the eligibility requirements and working with a tax professional, businesses can maximize their tax savings and improve their overall profitability. Don’t miss out on this valuable tax savings opportunity and explore whether your business is eligible for the ERC today.