The Employee Retention Credit (ERC) is one of the most advantageous and under-utilized tax credits introduced as the result of the COVID-19 pandemic relief funds.
In conjunction with this program, our clients have received over $2,000,000 in ERC refunds. Generally, reimbursement claims for these refunds are filed with the original or amended Federal quarterly payroll tax returns.
In 2021, the employee retention credit allows small businesses to claim a tax credit for 70 percent of salaries and wages paid to qualified employees. Accordingly, each employee’s tax credit could be worth up to $28,000 when taken as a whole.
This credit will be limited to just 50 percent of the qualifying wages, up to a maximum of $10,000 per employee for the full year. It is also pertinent to note that qualifying wages include employee health plan expenses paid by employers.
Business must have a decrease in revenues of at least 20 percent when comparing the first quarter of 2021 to the first quarter of 2019. To become eligible for the ERC for 2021, businesses must experience an annual decline of at least 20 percent in revenues.
However, a drop of 50 percent in gross receipts in 2020 was required to be eligible for the ERC in contrast to a fall of a quarter’s gross receipts in 2019. Additionally, a business that was suspended from operating due to governmental orders as a result of COVID-19 would qualify.
In recent months, Treasury and the IRS provided employers with the option of excluding proceeds from Paycheck Protection Program loan forgiveness and Shuttered Venue Operational Grants from gross receipts in determining their eligibility for the ERC.
If you would like assistance to determine if your business may qualify for ERC program, please reach out to our Team and we will help you through the process to claim the ERC refund.