If your company was affected by the Coronavirus Aid, Relief and Economic Security (CARES) Act in 2020 or 2021, you might qualify for the Employee Retention Tax Credit (ERTC). The ERTC is a refundable federal employment credit that gives companies up to 50% of their eligible wages earned during the eligible time period to offset payroll taxes.
Small businesses, governmental bodies and 501(c),(3) organizations are eligible employers. Employers that have 100 or less employees are eligible to receive the ERC for all wages paid to their employees regardless of whether or not those employees rendered services during the time period they designated.
How Can I Claim the ERTC?
The ERTC is an income tax credit that can be claimed by almost all businesses. The eligibility of a person is determined by a variety of factors. If you’re uncertain about your eligibility you can seek out the IRS provides a free audit service.
ERTC Eligibility is Different for Shuttered Venue Operator Grants and Restaurant Revitalization Fund grants
For restaurants that are rated as a “high-end” restaurant, a decline of 20% in gross receipts in the quarter ending in 2020 or 2021 is required to be eligible for the credit. The decline should also be compared to the gross receipts of the same quarter in the year 2019.
How do I claim a PPP Loan and the ERTC?
The American Rescue Plan Act was enacted March 2021 and allows small businesses that have received the Paycheck Protection Program loan (PPP) and ERTC eligibility. This was due to the fact PPP loans typically included a range of non-payroll costs such as utilities and rent. These aren’t included in the ERTC calculation.
In August 2021, Revenue Procedure 2021-33 was issued by the IRS to provide a secure place for businesses that have a PPP loan as well as a Shuttered Venue Operators Grant (or Restaurant Revitalization Fund grant). This safe harbor was created to prevent employers from over-claiming the ERTC.
What if I didn’t take PPP loans?
For many small-scale businesses that were struggling, an PPP loan was the only option to get through a rough time. In the case of a financial crisis, taking out a PPP loan was a quick solution to a short-term problem but it’s not the best option for long-term financial security. While the ERTC can help you recover financially, it’s important to understand the rules and nuances.
What Can I Use the ERTC on?
The ERTC is an entirely refundable tax credit that can be returned up to $26,000 per employee. Maximum amount you can claim is 50 percent of your wages that qualify plus any health-related expenses that you have incurred during the period.
What can I use the ERCC on?
The most important thing to bear in mind is that the ERTC is not free money to spend on vacations or cars. Instead, it’s money that the government owes you for getting through the tough times.
Many companies are eligible to claim the ERTC, a refundable tax credit. It is a way to make the payment of taxes on payroll that employees have incurred during processing their pay checks.