The COVID-19 period saw 18.1 million unemployed people. However, employers taking advantage of the Employee Retention Credit (ERC) enable many jobs and businesses to survive.
Therefore, businesses receiving the ERC benefits might want to look back to see if they qualify for additional credits. But, if you are clueless about this advantage, there is still time to register.
Continue reading for answers to the most expected FAQ about employee retention credit.
1. What Exactly Is the Employee Retention Credit (ERC)?
The CARES Act (Coronavirus Aid, Relief, and Economic Security Act), which provides relief for COVID-19, incorporates the ERC. Besides, the American Rescue Plan Act of 2021 was amended after the Consolidated Appropriations Act was expanded.
The employee retention tax credit’s goal is to assist employers in keeping workers on the payroll throughout COVID-19. As it offers a sizeable, completely refundable tax credit to small and medium-sized businesses.
The ERC is equal to up to 50% of an employee’s qualifying salary for the 2020 calendar year. This includes charges for health insurance. Further, wages paid between March 12, 2020, and November 1, 2021, are eligible for the credit. However, all federal withholding is canceled out by the credit the company receives. This covers Medicare withholding, employer FICA, and federal income tax withholding. Furthermore, any excess credit is refunded or advanced by the IRS.
2. How Can a Company Apply for ERC?
The company or nonprofit must go through one of the following during the calendar years 2020 or 2021 in order to be eligible:
- Business disruptions, including cuts to services, the supply chain, shortened hours of operation, etc.
- Government COVID-19 directives force businesses to close entirely or partially.
- 50% drop in revenue starting on or after March 13, 2020
- 2021 gross receipts will drop by 20%.
3. Can I apply for both the PPP and the ERC?
Employee Retention Credits and the Payment Protection Program fall under the assistance umbrella.
An SBA-backed loan is the Payment Protection Program. Its goal is to assist small enterprises in maintaining employment amid the COVID-19 pandemic. In addition, existing borrowers may be able to petition for PPP loan forgiveness even though the PPP program came to an end on May 31, 2021. Additionally, the company must demonstrate a reduction in gross receipts of at least 25% for similar 2019 quarters in order to qualify.
4. What Do Qualifying Wages Mean?
Regulations determine a qualifying wage. Besides, employers who take out PPP loans, who were earlier ineligible for ERC, must meet the eligibility standards.
Wages paid during the quarter in which the business halted operations should fall under the time span of March 13, 2020, and December 31, 2021. Furthermore, the same regulations apply to qualified medical expenses as to qualified wages, including pretax contributions from both the employee and the employer.
5. Can You Avail ERC Benefit In 2022?
The short answer is that you can submit an ERC application in 2022. The government gives businesses three years to review salaries received if you didn’t apply. This applies to any wages you gave workers after March 12, 2020.
To get the most reliable ERC customer service, contact ERC Specialists.
