The employee retention credit (ERC) is a tax credit designed to incentivize businesses to retain employees during times of economic hardship. The credit was originally introduced as part of the CARES Act in 2020, and has since been extended and expanded through subsequent legislation.
Despite its obvious benefits, many business owners remain unaware of the ERC’s potential to help them weather the ongoing economic challenges caused by the COVID-19 pandemic.
Here are just a few reasons why every business owner should be taking advantage of the employee retention credit.
1. It can help you keep your employees.
The ERC is intended to incentivize businesses to keep employees on their payroll, even during times when revenue is down. In essence, the credit provides an additional financial cushion that can enable businesses to keep paying their employees even when sales are slow.
By utilizing the ERC, business owners can help reduce staff turnover and maintain productivity levels, even during times of economic uncertainty.
2. It can save you money.
Another key benefit of the ERC is that it can help businesses save money on their taxes. The credit is refundable, which means that if the amount of the credit exceeds the business’s tax liability, the excess will be refunded as a payment.
For businesses struggling to make ends meet, any extra funds can be a significant help in helping to make payroll, pay overhead costs, and keep the business running smoothly.
3. It’s available to businesses of all sizes.
Unlike many other forms of government assistance that are only available to small businesses, the ERC is open to businesses of all sizes. Whether you’re a sole proprietor or a large corporation, you may be eligible to claim the credit.
Of course, the exact amount of the credit will depend on a variety of factors including your revenue, number of employees, and other financial metrics. But even businesses with just a few employees can benefit from the ERC if they are struggling to make payroll.
4. It can help you plan for the future.
By utilizing the ERC, businesses can gain a sense of financial stability even amid economic turbulence. This can help owners to plan for the future and make strategic investments in their business even when times are tough.
For example, owners may use the funds saved by utilizing the ERC to invest in new equipment or technology that could help streamline operations or open up new revenue streams.
Ultimately, the employee retention credit provides business owners with a valuable tool for weathering the ongoing economic uncertainty caused by the COVID-19 pandemic. By taking advantage of the credit, owners can help to keep their employees on the payroll and position their businesses for long-term success.