As the year 2022 approaches, it’s important for business owners and entrepreneurs to start thinking about maximizing their savings. One way to do that is to take advantage of the employee retention tax credit (ERTC). The ERTC is a tax credit that was created in response to the COVID-19 pandemic, and it aims to encourage businesses to keep their employees on payroll. In this article, we’ll take a closer look at what the ERTC is, how it works, and how you can take advantage of it to maximize your savings.
What is the employee retention tax credit?
The employee retention tax credit is a refundable tax credit that is available to businesses that kept employees on their payroll throughout the COVID-19 pandemic. The credit was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law in March 2020.
How does the employee retention tax credit work?
The ERTC is calculated based on the wages paid to employees during the period of March 12, 2020, to December 31, 2021. The credit is equal to 70% of qualified wages paid during this period, up to a maximum of $10,000 per employee per quarter. This means that the maximum credit that a business can claim for each employee is $28,000 in total over 2020 and 2021.
Who is eligible for the employee retention tax credit?
To be eligible for the ERTC, a business must meet one of two criteria. First, the business must have experienced a decline in gross receipts of 50% or more in any quarter of 2020 compared to the same quarter in 2019. Alternatively, the business must have been partially or fully suspended due to a government order related to COVID-19 during any quarter of 2020.
How can you maximize your savings with the employee retention tax credit?
To maximize your savings with the ERTC, there are a few things you can do. First, make sure you’re tracking your qualified wages carefully. This will help you determine how much of a credit you’re eligible for. Second, consider hiring a tax professional to help you claim the credit. They can make sure you’re taking advantage of all the available deductions and credits. Finally, don’t wait too long to claim the credit. The IRS has extended the deadline to claim the ERTC to September 30, 2022, but it’s always best to file your taxes as soon as possible and claim the credit as soon as you’re eligible.
In conclusion, the employee retention tax credit is an excellent way to maximize your savings in 2022. By keeping track of your qualified wages, hiring a tax professional, and claiming the credit as soon as possible, you can save a substantial amount of money on your taxes. If you’re unsure whether you’re eligible for the credit or how to claim it, be sure to consult a tax professional for guidance.