Employment Retention Tax Credit: How You Can Benefit From It

What Exactly Is the Employment Retention Tax Credit?

On March 25, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act into plan. Signed into law two days later on the 27th, this was an act with a package of over 2.2 trillion dollars into emergency assistance that was put into place to provide help for the coronavirus affected United States population. One of the relief provisions that came along with this act was the Employment Retention Tax Credit. This provision was specifically geared towards small business owners and sought to help them find some financial assistance during the pandemic. As sales began to diminish, some small business owners were tempted to lay off employees to save money. However, with the help of the Employment Retention Tax Credit, businesses were encouraged to keep all of their workers employed during those difficult times.

  The tax credit given is equivalent to 50% of qualified wages paid to an employee between March 12, 2020, and Jan. 1, 2021. This is including qualified health plan expenses. The maximum amount that can be claimed is $10,000 from qualified wages, which means that maximum credit for a single employee could be $5,000. The credit is applied based on the amount of payroll taxes that were paid by the employer. Additionally, the IRS allows eligible businesses to earn an advance payment on their credit. This is meant to assist liquidity concerns that are had by many businesses who are using the Employment Retention Tax Credit.

You might be reading this and wondering if you are too late to apply for this b enefit. Luckily, this is not the case. If you want to claim the ERTC for 2020, you can claim this until April 15, 2024. If you wish to claim the ERTC for 2021, you have until the following year, on April 15, 2025, to claim the credit. 

Eligibility Requirements for the Employment Retention Tax Credit

Now that you know that you have some extra time to file for the Employment Retention Tax Credit, you may be wondering what the next steps are. You must first find out whether or not you are fully entitled to this credit if you are seeking to apply. The good news is that there are a few different types of businesses that can apply to this provision. There are also other provisions from the CARE Act that may provide you some relief if this one is not applicable to you.

The Employment Retention Tax Credit is available to qualified business owners who have been affected by the pandemic. Luckily, this includes most types of businesses. However, those who are self employed or government employers will not qualify for this. The IRS website lists two ways in which businesses can qualify for this provision by doing either one of the following. The first way in which you can qualify is if you completely or partially suspended your business operations at any point during 2020 or 2021 due to a coronavirus government mandate. The other way in which you may qualify for this relief is if you can provide proof of a significant decline in gross receipts during a calendar quarter in 2020. To qualify through this method, the gross receipts of the selected quarter in which you provide must be less than 50% of the gross receipts of the same quarter but in 2019. The amount of employees that your business has also affects the business’s eligibility. If your business has 100 employees or fewer, all of these employees are eligible. However, if your business has any amount greater than 100 employees, the only eligible employees are those who are being paid but are not servicing due to pandemic-related cutbacks. There are a couple more things that may prevent a business from being eligible. Firstly, employers who receive a Paycheck Protection Plan loan, or PPP loan, may not be eligible for the Employment Retention Tax Credit. On top of this, employers are also not allowed to double-claim employees or their wages in regards to either the Family and Medical Leave Act, or FMLA , and/or the Work Opportunity Tax Credit. 

It’s easy to feel overwhelmed and uneasy when it comes to dealing with the IRS. You may also be uncertain of whether or not you and your business qualifies for assistance. Luckily, Empire Business Law can provide you with assistance in this process. We are a trusted law firm with experience helping business owners maximize their business.  We will file and guide you through the ERTC application process. 

You may be seeing and hearing ads from companies you’ve never heard before, asking for your business. Those companies are usually ill equipped to make the proper analysis on whether your business qualifies for the tax credit. This can lead to issues with the IRS as well as future auditing (not fun stuff).  Unlike many of those “pop up” ERTC companies, our law firm is here to stay and you’ll know exactly where to find us. 

To find out if you qualify, call our office at (855) 781-7705. Tell our receptionist you want to schedule a consultation to discuss if your business qualifies for Employment Retention Tax Credit. We look forward to hearing from you. 

The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.