As a business owner or manager, you know that attracting and retaining the best employees is key to your success. However, with the current job market being highly competitive, finding and keeping top talent isn’t always easy. In addition to offering competitive salaries and benefits, there’s another tool you can use to save money and keep your best employees – the employee retention tax credit (ERTC).
What is the employee retention tax credit?
The ERTC is a tax credit that was introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020. The credit was designed to help businesses that were adversely affected by the pandemic to keep their employees on payroll. The ERTC is a refundable credit, which means that even if your business doesn’t owe taxes, you can still receive a refund for the credit amount.
How does the employee retention tax credit work?
The ERTC is a tax credit of up to $7,000 per employee, per quarter. To qualify for the credit, your business must meet one of two criteria:
– Your business operations were fully or partially suspended due to a governmental order related to COVID-19.
– Your gross receipts for a calendar quarter decreased by more than 50% compared to the same quarter in the previous year.
If your business meets one of these criteria, you can claim the ERTC for wages paid to employees after March 12, 2020, and before January 1, 2022. The credit is equal to 70% of eligible wages paid to employees, up to a maximum of $10,000 per employee per quarter.
How can the employee retention tax credit help you save money and retain your best employees?
The ERTC can help you save money in two ways:
– By reducing your business’s tax liability: If your business owes taxes, you can use the ERTC to reduce your tax liability. For example, if you have four employees and qualify for the ERTC for each of them, you can receive a tax credit of up to $28,000 per quarter.
– By providing a cash refund: If your business doesn’t owe taxes, you can still receive a cash refund for the credit amount. This can help you free up cash flow to invest in your business or retain your best employees.
In addition to saving money, the ERTC can help you retain your best employees. By offering the credit, you can provide a financial incentive for your employees to stay with your business. This can help you reduce turnover and retain the people who are essential to your success.
In conclusion, the employee retention tax credit is a valuable tool for any business looking to save money and retain their best employees. By taking advantage of this credit, you can reduce your tax liability, receive a cash refund, and offer a financial incentive for your employees to stay with your business. To learn more about the ERTC and how it can benefit your business, speak with your accountant or tax professional.