As the pandemic continues to take a toll on businesses, the federal government is taking steps to provide relief in the form of tax credits. One such credit is the employee retention tax credit (ERTC), which was introduced last year as part of the CARES Act. Now, a new provision in the Consolidated Appropriations Act of 2021 has expanded the ERTC, making it easier for businesses to qualify and receive greater benefits.
The ERTC is designed to encourage businesses to retain employees during times of economic uncertainty. It provides a refundable tax credit of up to $5,000 per employee for businesses that continue to pay wages to their employees while experiencing economic distress. The credit applies to wages paid between March 12, 2020 and January 1, 2021.
The original ERTC was only available to businesses that experienced a significant decline in gross receipts or were forced to shut down operations due to government orders. However, the new provision in the Consolidated Appropriations Act expands eligibility and increases the credit amount.
Under the new rules, businesses that experienced a decline in gross receipts of at least 20% in any quarter of 2020 compared to the same quarter in 2019 are eligible for the credit. This opens up the credit to a wider range of businesses that may have been struggling but did not meet the original criteria.
In addition, the credit amount has been increased from a maximum of $5,000 per employee to a maximum of $14,000 per employee. This means that businesses can receive a larger credit for each employee they retain during the covered period.
The ERTC can provide much-needed relief to struggling businesses that are trying to maintain their workforce in the face of economic uncertainty. By incentivizing businesses to retain employees, the credit can help to prevent layoffs and boost the economy.
If you’re a business owner and you’re struggling to keep your head above water, the ERTC may be a lifeline that can help you stay afloat. Talk to your tax advisor or accountant to see if you qualify for the credit and learn more about how you can take advantage of this valuable benefit. With the right support, your business can weather the storm and emerge stronger on the other side.