Four Things Companies Need to Know about the Employee Retention Tax Credit

Executive Summary

• Employee Retention Credit is a payroll tax credit unrelated to federal income tax.
• Companies can get up to $26,000/employee in payroll tax credits.
• The deadline to apply for the ERTC ranges from Q1 2023 to Q3 2024.

During the COVID-19 pandemic, the federal government introduced several financial relief programs for businesses navigating the economic fallout. Employee Retention Credit allows companies that maintained staff during the pandemic to get up to $26,000 in payroll tax credits.

In the following, we will summarize the top details you need to know about determining eligibility, how the program works, and how to apply.

#1 – How much can operators get from the ERTC?

ERTC claimants can get up to $26,000 per employee in credits for payroll tax payments made between March 12, 2020, and September 30, 2021. It breaks down like so:

2021: Maximum credit of $21,000 per employee
2020: Maximum credit of $5,000 per employee

#2 – What businesses are eligible for the ERTC?

All businesses may qualify if they meet one or more of these criteria:

You suspended business activity, either partially or in full, due to local, state, or federal government lockdown orders.

You had a decline in gross receipts of 50% or more during any quarter of 2020 compared to the same quarter of 2019.
You had a decline in gross receipts of 20% or more during any quarter of 2021 compared to the same quarter of 2019.

For 2020 credits, companies with fewer than 100 employees may be eligible for the credit (for all employees). For 2021 returns, companies with fewer than 500 employees may qualify for the credit (for all employees).

A company with over 100 (in 2020) or over 500 (in 2021) is not disqualified but does have different eligibility rules.

#3 – How does a business claim the ERTC?

As a payroll tax credit, the ERTC claim is reported on amended Form 941 for the period in question. To determine qualification on Form 941, your company will need to provide information like:

• Quarterly revenues
• Payroll tax returns
• Employee wages
• Lines of business

#4 – What is the deadline to apply for the ERTC?

The deadline for claiming the ERTC depends on the return you seek to amend. The statute of limitations for amending Form 941 is three years from the original filing. So, the deadline will range between Q1 2023 and Q3 2024.

Support for claiming the ERTC

Determining eligibility and calculating a legitimate ERTC claim can be complicated. Additionally, the IRS has indicated they will be taking a close look at ERTC claims. We recommend working with a qualified CPA firm that understands tax credits and incentives.

We provide a Phase 1 Assessment free of charge. If you decide to proceed, we bill on a flat fee, no-commission basis to determine eligibility, calculate credits, submit forms, and prepare documentation.

Please contact us if you’d like a free consultation to help determine if you qualify.

Posted: 01/14/2023