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Don’t miss this HUGE tax credit

10 Dec

Don’t miss this HUGE tax credit

The past year and a half can be characterized in many ways, but challenging is the most accurate description. A large part of this was influenced by the ever-changing legislation pertaining to pandemics. Despite the fact that things are beginning to normalize, there is the opportunity to continue taking advantage of significant tax savings through the Employer Retention Tax Credit (ERTC).

Why is this so significant?

In March 2020, the ERTC was established as part of the CARES Act. After that, it was expanded by both the Consolidated Appropriations Act, 2021, which was signed into law by President Trump on December 26, 2020, and the America Rescue Plan Act of 2021, which was signed into law on March 11, 2021.

What? Is the government actually giving away thousands of dollars in tax credit after giving away millions in PPP forgiven loans? Yes, that is correct. The ERTC could be worth up to $5,000 per employee for 2020 and up to $28,000 per employee for 2021.

The following are some relevant examples of the ERTC:

  • An eligible business with ten employees could receive up to $50,000 in ERTC (10 employees * $5,000).
  • For a business with ten employees, ERTC could reach $70,000 per quarter by 2021, a total of $280,000.

These are some eye-catching numbers! Next, let’s talk about how to qualify.

What are the eligibility requirements?

Unfortunately, not all businesses are aware that they qualify, which is fantastic news.

The 2020 Qualifications are as follows:

A government authority ordered your business to close due to COVID-19 in 2020 and you have employees.

If gross receipts were less than 50% of any quarter in 2020 compared to 2019; you could qualify for the Employee Retention Tax Credit (ERTC).

Qualifications for 2021:

As of 2021, the requirements have been significantly loosened, and you can qualify if:

If your revenue declined by more than 20% from the same quarter in 2019 (i.e., gross receipts are less than 80%), you might qualify.
Additionally, if your business revenue for the past three years has been less than $1 million or if you started your business after February 15, 2020, you can apply for the 3rd and 4th quarters of 2021.

How does it work?

There are some things you need to be aware of, and yes, it sounds too good to be true. It is not possible to qualify for the PPP1 or PPP2 loan forgiveness and the ERTC on the same wages. You must understand this – as it may change the type of expenses you choose for loan forgiveness. Please contact us ASAP if you think you qualify for ERTC and have not applied for forgiveness! With our PPP and ERTC experts, many firms have made the best decisions based on their unique circumstances.

Also, you can’t use the same wages to qualify for some other credits. Do not let that hold you back; with a little strategic planning, you can divide wages between the two and maximize both.

Calculation of the credit

You will receive the credit on your quarterly 941 forms. The credit is calculated quarterly based on your gross wages. As an immediate tax credit and cash flow boost, you may be eligible to reduce payroll tax payments and retain a portion of employee and employer taxes. Once your 941, it can be refunded by submitting a 941X.

Numerous opportunities exist for tax planning

As a cash basis company, you have the opportunity to strategically plan your revenue for the 3rd and 4th Quarters of 2021. By qualifying for the 3rd quarter, you will automatically qualify for the 4th quarter. This win-win scenario pushes invoicing until the end of the 3rd quarter, so receipts aren’t received until the 4th quarter.

If you received the PPP1 or PPP2, have FFCRA (COVID pay), WOTC, R&D, or FAR OH, you have planning opportunities to maximize the ERTC, other credits and/or loan forgiveness.
Knowledge is power, and planning is everything!

Steps to be taken

What motivates us to share this information so passionately? Having worked with so many businesses who did not believe they qualified for the ERTC until they spoke with us and found out they did qualify. It is no secret how advantageous this tax credit can be. Do not lose out on THOUSANDS of dollars.

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