Employee Retention Credits Still Available To Claim
In the CARES Act of 2020, Congress created the ERTC, Employee Retention Tax Credit , to reward and encourage businesses to keep their employees on payroll during the COVID-related shutdowns. The ERTC aimed to incentivize employee retention by offering employers a quarterly credit for each qualified employee. The ERTC has a maximum credit of $5,000 per employee in 2020 and $21,000 per employee in 2021. Employers can still retroactively take advantage of this credit against federal employment taxes on qualified wages paid to their employees from March 13, 2020, through September 30, 2021.
ERTC Eligibility. Eligibility rules changed from 2020 to 2021, as well as the amount of wages available to claim. Eligible businesses or tax-exempt organizations that conduct a trade or business must have experienced one or both of the following criteria:
- The business was forced to partially or fully suspend or limit operations by a federal, state, or local governmental order.
- The business experienced a 50% decline in gross receipts during any quarter of 2020 versus the same quarter in 2019 and a 20% decline in gross receipts in 2021 against the same quarter in 2019.
Claiming ERTC. Your ERTC claim will include total qualified wages and healthcare costs. To claim the credit, start with these steps:
- Amend previously filed 941
- For each qualifiable quarter, fill out and submit a 941X
Qualifying Wages. For 2020, if you averaged more than 100 full-time employees (FTEs), only wages for those you retained who are not working can be claimed. If you employed 100 or fewer FTEs, you can claim wages for all employees whether or not they are working. For 2021, the threshold is raised to 500 full-time employees, meaning if you employ more than 500 FTEs, you can only claim the ERTC for those who are not providing services. If you have 500 or fewer FTEs, you can claim the credit for all of them, working or not.
How does it work? The Employee Retention Credit is taken off the employer’s share of Social Security taxes. However, the credit is fully refundable. So, if the credit were to exceed the employer’s total amount owed to Social Security in any calendar quarter, the excess is refunded to the employer.
The credit was initially set to expire on January 1, 2022, allowing employers to claim it for all four quarters of 2021. However, in November of 2021, a bipartisan physical infrastructure law included a provision changing the ERTC’s timeframe to only apply for the first three quarters of 2021 and not Q4.
Talley’s professionals have spent literally hundreds of hours reviewing the law, regulations, and FAQs issued on an almost daily basis regarding the ERC and PPP, and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or refund process.