The Employee Retention Credit (ERTC) is a tool that encourages employers to keep employees on payroll during the COVID-19 crisis. The credit is currently available on wages paid to employees between 3/12/2020 and 9/30/2021 for businesses whose operations were impacted by COVID-19. The maximum credit is $26K per employee.
We wanted to bring you a quick overview of some important updates, highlights and key things to keep in mind, when considering how this applies to you.
ERTC vs PPP
- Employers who got PPP loans can also receive the ERC
- Wages used to receive PPP forgiveness are not available for the ERC
- There are no limitations to how ERC funds can be spent. The money does not need to be repaid
- The ERC funds are subject to federal income tax (state laws vary)
- Previously filed tax returns for the period that qualifies for the credit will need to be amended
- Revenue declined by 50% in any quarter of 2020 compared to the same quarter in 2019
- Revenue declined by 20% in any of the first 3 quarters of 2021 compared to the same quarter in 2019
- Business was impacted by a government mandated shutdown that resulted in either:
- A full shutdown of business operations, or
- A partial shutdown that impacted at least 10% of business operations or service hours, or
- A disruption caused by a mandatory shutdown of a supplier
- If a business was able to continue operating via telework, they would not qualify. However, if the period of transition to telework was more than 2 weeks, the transition period could qualify.
CLAIMING THE ERTC
- The credit is claimed on the Form 941X: Adjusted Employer’s Quarterly Federal Tax Return
Depending on when you filed your original 941 return, the filing of the 941X would be due within 3 years of that filing date. So whichever quarter you would like to claim the credit for, you would have 3 years from that quarterly filed return.
As always, we are here to help walk you through this. Let us give you a big picture of how this can affect you, calculate how this best can serve your business, and get you the resources you need to get started! Click here to book your free consultation today!