Everything You Need to Know About Employee Retention Credit

Have you ever thought about whether you are qualified for employee retention credit (ERC) or not? 

Do you know the process of claiming it? Even if you haven’t, it is still possible to make changes to your 2020 and 2021 payroll tax returns. But knowing if you qualify for it or not is also essential.

Find the answers to all your questions down below.

What is the ERC?

The Employee Retention Credit (ERC) is a program created to help small businesses and other companies during the time of the COVID-19 health crisis that resulted in an economic shutdown. Such companies can receive a refundable tax credit if they maintain the payroll in the year 2020 and 2021. This was created so that employers keep maintaining payroll even during the pandemic. 

Any employer, despite their size, is eligible for it. However, the ones who have provided wages to the employees can get the benefit of the ERC Credit. But the rules may differ for different employers based on some deciding factors.

How much money can be credited or refunded from the IRS?

In the year 2020, the maximum benefit that an employer can receive is up to $5,000 per employee. In the year 2022, the maximum benefit that an employer can receive is up to $28,000 ($7,000/quarter) per employee. 

What are the basics for qualifying for ERC?

The ERC is known for first offsetting payroll taxes. After that, it is refundable.  

An employer can qualify for it in two ways. 

• When the ERC qualified wages are the wages paid when the business operations were suspended because of a government order, either partially or fully, 
• Or there was a decline in gross receipts for the business.

In the year 2020, the decline should be 50% when compared to the revenue of the quarter in the previous year. In the year 2021, the revenue decline should be 20%.

When one goes for the government order method, it becomes a little complicated to calculate.

However, this can benefit employers, especially small employers. These employers can get more benefits from the ERC. Till the time they qualify as an Eligible Employer, they also get the opportunity to include wages paid to all employees.

Bottom Line:

The ERC Credit can be quite useful for small businesses and can benefit them in a lot of ways. To get started with it, you can get in touch with us at G&S Accountancy Inc. With our help, you can easily check whether you qualify for the ERC Credit or not. We can also assist in amending 2020 or 2021 tax returns to claim the credit. 

To know more, contact us today!