How to Claim an Employee Retention Tax Credit
The Employee Retention Tax Credit is a way for businesses to reduce their payroll taxes. Employers can claim a credit once every three years if they make enough qualifying wages. It was last in effect in the third quarter of 2021. The statute is retroactive, meaning that you can claim it retroactively as long as your payroll tax statute started after February 15, 2020. There are limitations on how much you can claim for a calendar quarter.
A multi-national retail chain recently qualified for over $50M in employee retention tax credits. The retailer calculated eligible wages under the CARES Act based on the organization’s structure and pay types. The company worked with ADP to determine eligibility and secure tax credits. It has now earned a positive return on investment in its business. Here are some helpful tips to maximize your tax credits. This article outlines how to claim an employee retention tax credit.
Upon receipt of a qualified tax return, you can apply for the Employee Retention Tax Credit. The credit equals 50% of the qualified wages of eligible employees. Eligible employers can claim this tax credit after March 12, 2020, but before January 1, 2021. The Employee Retention Tax Credit has undergone a few revisions since its introduction, and you may be eligible for a retroactive reimbursement if you have employees on payroll in the 2020 and 2021 tax years.
In addition to the new deadline, there are still two more ways to maximize the tax credit. First, you can use an alternative quarter election to compare revenue declines. For example, if you started your business in Quarter 4 of 2019, you can use that quarter’s gross receipts as the basis for the new calculation. Second, you can use a prior quarter to determine the percentage decline. You can also use your current gross receipts for that quarter.
The Employee Retention Tax Credit (ERTC) is a refundable tax credit for employers. It was created as a result of the Coronavirus Aid, Relief, and Economic Security Act (CARES). It is available to employers who want to keep employees. It is slated to be expanded to all employers who took out PPP loans in 2020 and beyond. This credit is a great incentive to keep your employees. There are some important requirements, though.
For example, an employer who has 500 or fewer employees must provide paid family leave and sick leave. For businesses that meet these requirements, a refundable tax credit can be applied to wages paid during these leave periods. The amount can be up to $5 million. For businesses that are impacted by the pandemic, the process is simple and requires only 15 minutes of work. If your business is eligible for the Employee Retention Tax Credit, schedule a 15-minute meeting with a qualified advisor.
Employers can claim the ERC for up to 25% of their employees’ wages. If a restaurant is able to retain 20% of its employees in the first quarter of 2021, they can claim up to $7,000 per employee. For a restaurant with 30 employees, this could be as much as $840,000. So, if you are thinking about expanding your business, employee retention tax credits are a great option for retaining your employees.