Last Date to Claim Employee Retention Tax Credit – ERTC

The Employee Retention Credit (ERC) was introduced to encourage small businesses to retain their employees during the COVID-19 pandemic. The credit was refundable tax credit, which meant that businesses could claim it even if they didn’t owe any payroll taxes.

Although the program is set to sunset at the end of 2021, businesses can still claim the employee retention credit on amended payroll tax returns as long as the statute of limitations remains open.

What is the Employee Retention Credit?

The Employee Retention Credit is a refundable payroll tax credit that eligible employers can claim to encourage them to retain their employees during the COVID-19 pandemic. The employee retention credit is calculated based on qualified wages paid to employees and is limited to a certain amount per employee.

A business eligible for employee retention credit can claim the credit on an original or adjusted employment tax return for a period within those dates.

Eligibility for the Employee Retention Credit

To become eligible employers for the Employee Retention Tax Credit, businesses must meet certain criteria. They must have experienced a decline in gross receipts or a full or partial shutdown of their business due to government orders.

They must also have paid qualified wages to their employees during the eligible period. The credit is available to eligible employers, including tax-exempt organizations, that operate a trade or business during the eligible period.

How to Claim the Employee Retention Tax Credits

To claim the Employee Retention Credit, businesses must follow certain steps. First, they must review the significant decline in gross receipts or determine if there is a full or partial shutdown of their business due to government orders.

Second, they must locate all payroll information filed with the quarterly payroll return and calculate the employee retention credit based on limits specified by the Internal Revenue Service (IRS).

Finally, they must file Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, to claim the credit for prior 2020 and 2021 quarters.

Last date to Claim the Employee Retention Credit

Although the program is set to sunset at the end of 2021, businesses can still claim the credit on amended payroll tax returns as long as the statute of limitations remains open. The statute of limitations is three years from the date of filing of the quarterly payroll tax return.

Therefore, businesses that file quarterly employment tax returns can file Form 941-X to claim the credit for prior 2020 and 2021 quarters. However, they must not delay assembling the required documentation and submitting it to the IRS before the quarterly deadline.

Refundable Payroll Tax Credit

The Employee Retention Tax Credit is a refundable payroll credit, which means that businesses can claim it even if they don’t owe any payroll taxes. The credit can be used to offset payroll tax or can be refunded to the business if the credit exceeds their payroll tax liability.

Gross Receipts and Payroll Costs

To be eligible for the Employee Retention Credit, businesses must have experienced a decline in gross receipts or a full or partial shutdown of their business due to government orders. In addition to gross receipts and payroll costs, they must also have paid qualified wages to their employees during the eligible period. The credit is calculated based on qualified wages paid to employees and is limited to a certain amount per employee.

Key Takeaway

The Employee Retention Credit is a valuable resource for businesses that have been impacted by the COVID-19 pandemic. Although the program is set to sunset at the end of 2021, eligible businesses can still claim the credit on amended payroll tax returns as long as the statute of limitations remains open.

To claim the credit, businesses must follow certain steps, including reviewing their significant decline in gross receipts or determining if there is a full or partial shutdown of their business due to government orders.

They must also locate all payroll information filed with the quarterly payroll return and calculate the credit based on limits specified by the IRS. It is important for eligible businesses to assemble the required documentation and submit it to the IRS before the quarterly deadline to avoid delays in processing the amended return.

In conclusion, the Employee Retention Credit is an important resource for businesses impacted by the COVID-19 pandemic. Eligible businesses can still claim your credit on amended payroll tax returns as long as the statute of limitations remains open. It is crucial for businesses to review their eligibility criteria and follow the necessary steps to claim your credit before the ERC deadline. By doing so, businesses can receive the funds they need to retain their employees and continue operating their business during these challenging times.