The employee retention tax credit (ERTC) has been a critical lifeline for many businesses during the COVID-19 pandemic. This tax relief program helps businesses retain their employees by providing a refundable tax credit for wages paid to certain employees. However, the program was set to expire at the end of 2021, leaving many businesses unsure of what to expect in 2022.
Fortunately, Congress has recently introduced the employee retention tax credit Reinstatement Act (ERTCRA), which aims to extend and expand the ERTC through the end of 2022. This is great news for businesses that have relied on the ERTC to keep their employees on payroll and avoid layoffs.
Here are some of the key benefits that the ERTCRA will provide to businesses:
1. Increased tax Credits
Under the ERTCRA, the maximum tax credit per employee per quarter will increase from $7,000 to $12,000. This means that businesses will be able to claim a higher credit for each employee they retain, which will help offset their payroll costs.
2. Expanded Eligibility Criteria
The ERTCRA will expand the eligibility criteria for the tax credit, making it available to more businesses. Specifically, businesses that experienced a decline in gross receipts of at least 10% (compared to the same quarter in 2019) will be eligible for the credit. Previously, businesses had to show a decline of at least 50% to qualify.
3. Relief for Startups and Small Businesses
The ERTCRA includes a provision that will provide targeted relief for startups and small businesses that have been hit hard by the pandemic. Specifically, businesses that started operating after February 15, 2020, and have average annual gross receipts of $1 million or less will be eligible for the credit.
4. Extension Through the End of 2022
Perhaps the most significant benefit of the ERTCRA is that it will extend the program through the end of 2022. This will provide businesses with more certainty and stability as they plan for the next year. It will also give them more time to take advantage of the tax credit and retain their employees.
In conclusion, the employee retention tax credit Reinstatement Act is great news for businesses that have relied on the ERTC to keep their employees on payroll during the pandemic. By expanding the eligibility criteria, increasing the tax credits, and extending the program through the end of 2022, the ERTCRA will provide much-needed relief to businesses struggling to stay afloat. If you own or manage a business that has been impacted by the pandemic, be sure to take advantage of this tax credit while it’s available.