Employee Retention Credit
Does your business qualify for this tax refund?
We have helped many small business owners bring in additional Cash Flow through the this tax refund! Your business could be next!
The process is simple;
1.
Take this quick quiz to determine if your business qualifies.
2.
Provide basic paperwork.
3.
Wait for you refund check to come in the mail.
What is the Employee Retention Credit (ERTC)?
There has been a lot of confusion regarding the ERTC or ERC, mainly because the laws governing this tax credit have changed multiple times. As a result, many small businesses (and their tax professionals) are not taking advantage of this opportunity.
In it’s simplest definition, the ERTC is a federal program that was created as an incentive for employers to keep employees on payroll during the pandemic. Eligible payroll (and health benefits) costs can be reimbursed up to $5,000/employee/year for 2020, and up to $7,000/employee/quarter for 2021.
Table of Contents
Does your Business qualify for the ERTC?
- In order to be eligible every company must be an Employer, and have had W-2 employees during the pandemic.
- The company’s operations or finances must have been affected by the pandemic.
What is a Reduction in Quarterly Gross Receipts?
This is one of the definitions that has changed since the Tax Credit was initially created. Originally the bill stated that businesses needed to show a 50% reduction in Gross Receipts for quarters beginning on March 12, 2020 – December 31, 2020 when compared to 2019 in order to qualify for the Tax Credit.
When the bill was revised and extended for Quarters January 1, 2021 through September 30, 2021, they reduced the reduction of Gross Receipts to only 20%. Making the Tax Credit more accessible to many small businesses.
If you use an accounting software, you should be able to pull a Profit & Loss Report by quarter. Then compare your 2020 and 2021 Gross Receipts with those from the same quarter of 2019. If you show a reduction greater than or equal to the qualifying percentages in the chart above, you should qualify for the tax refund.
How much money will you get back?
This is where it gets a bit tricky, and to maximize your refund you will want to work with a professional who is familiar with filing the required 941 amendments.
As I mentioned above, your business could be reimbursed for eligible payroll (and Health Insurance) costs up to $5,000/employee/year for 2020, and up to $7,000/employee/quarter for 2021.
As you can probably imagine, this Tax Credit can add up quickly, and possibly give your company a boost of cash to offset some of the hardships you have faced.
Frequently Asked Questions
Is this a taxable refund?
Yes, the funds are taxable, unlike the PPP Loan which was forgiven.
The Employee Retention Tax Credit will offset your payroll expenses, thus resulting in an increase to Net Income (or Taxable Income).
Related Article: How to record deposit of Employee Retention Credit
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If a business received one or two PPP Loan are they still eligible for the ERTC?
Yes, all business are still eligible regardless of receiving the PPP Loans.
The ERTC and the PPP Loan were initially created around the same time. But when the ERTC first came out you were not able to apply for both ERTC and PPP. This restriction was retroactively rescinded in December of 2020. Due to this initial restriction many business owners took it off their radar, and that is one of the major reason many businesses have not taken advantage of this credit.
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