The Employee Retention Credit under the CARES Act gives eligible employers up to $26,000 for every employee they kept on the payroll during COVID.
I’m Don Lawson. And, I’m here to help you claim your credit. Let’s find out if you qualify!
Businesses or organizations must meet at least one of the listed requirements in order to qualify. Get answers to commonly asked questions and determine if your business or organization qualifies… read more
Even though the program ended in 2021, businesses still have time to claim the ERC. When you file your federal tax returns, you’ll claim this tax credit by filling out Form 941… read more
The Employee Retention Credit (ERC) was authorized under the CARES Act and encourages businesses to keep employees on the payroll.
Paycheck Protection Program (PPP) recipients are now eligible.
The ERC was not widely used until March 2021, when updated IRS regulations made this type of COVID-19 Relief more accessible. In short: thousands of businesses who once picked between the Paycheck Protection Program (PPP) and ERC can now probably use both stimulus programs, by amending their quarterly Form(s) 941 payroll returns.
Listen to B-97.5’s Michelle Silva interview Don Lawson, President of Smart Business Accounting, about the Employee Retention Credit. Don dives deep into the nuts and bolts of the Employee Retention Credit and also why he doesn’t charge any fees to churches, charities and non-profits.
Click the arrow beside each question to reveal the answer.
The Employee Retention Credit (ERC) is a tax credit created under the CARES Act. The ERC legislation was expanded under the Consolidated Appropriations Act, which took effect on January 1, 2021. As a result of this expansion, all employers who took PPP loans could be eligible for the ERC for 2020 and 2021.
For the 2020 program, the ERC is equal to 50% of qualified wages (including allocable qualified health plan expenses) that eligible employers pay their employees. This applies to wages paid after 3/12/2020 and before 1/1/2021. The maximum amount of wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an employee is $5,000.
For the 2021 program, the credit is increased to 70%, and the limit is $10,000 per quarter. This means the annual maximum for an employee is $21,000.
According to the National Federation of Independent Business (NFIB), only 4% of small business owners are familiar with the ERTC program and many are asking what is ERTC. However, this little-known government aid has massive benefits for businesses.
Businesses can no longer pay wages to claim the Employee Retention Tax Credit, but they have until 2024 to do a look back on their payroll during the pandemic and retroactively claim the credit by filing an amended tax return.
Although the Employee Retention Credit (ERC) program has officially sunset, this does not impact the ability of a business to claim ERTC retroactively. In fact, businesses have up to three years from the end of the program to conduct a lookback to determine if wages paid after March 12, 2020 through the end of the program are eligible.
For most businesses, the credit could be claimed on wages until Sept. 30, 2021, with certain businesses having until Dec. 31, 2021 to claim qualified wages.
What counts as qualified wages depends on the size of your business and how many employees you have on staff. There’s no size limit to be eligible for the ERC, but small and large companies are treated differently.
For 2020, if you had more than 100 full-time employees in 2019, you can only claim the wages of employees you retained but were not working. If you have fewer than 100 employees, you can claim everyone, whether they were working or not.
For 2021, the threshold was raised to having 500 full-time employees in 2019, giving employers a lot more leeway as to who they can claim for the credit. Any wages that are subject to FICA taxes qualify, and you can include qualified health expenses when calculating the tax credit.
This income must have been paid between March 13, 2020, and September 30, 2021. However, recovery startup businesses have to claim the credit through the end of 2021.
To qualify for the credit, your business or nonprofit organization must meet at least one of the following requirements in the calendar quarter they want to use the credit:
1. The business was fully or partially closed due to a government order stemming from the COVID-19 pandemic, or
2. The business had a significant decline in gross receipts
For the 2020 tax year, the business must have seen a 50 percent drop in gross receipts for the quarter compared to the corresponding quarter in 2019. The business must also have 100 or fewer full-time employees, excluding the owners.
For the 2021 tax year, the business must have had a 20 percent or greater drop in gross receipts for the quarter compared to the same quarter in 2019. The business must also have between 1 and 500 full-time W-2 employees, excluding the owners.
Please call me at 865-705-7142 to set up a free, no-obligation consultation to see if your business qualifies for the Employee Retention Credit.
Even though the program ended in 2021, businesses still have time to claim the ERC. When you file your federal tax returns, you’ll claim this tax credit by filling out Form 941.
Some businesses, especially those that received a Paycheck Protection Program loan in 2020, mistakenly believed they didn’t qualify for the ERC. If you’ve already filed your tax returns and now realize you are eligible for the ERC, you can retroactively apply by filling out the Adjusted Employer’s Quarterly Federal Tax Return (941-X).
Since the tax laws around the ERC have changed, it can make determining eligibility confusing for many business owners. It’s also difficult to figure out which wages qualify, and which don’t. The process gets even harder if you own multiple businesses. And if you fill out the IRS forms incorrectly, this can delay the entire process. Using a professional is the best way to ensure that the process flows smoothly, and you receive the maximum amount you qualify for in the shortest time frame available.
Please call me at 865-705-7142 to set up a free, no-obligation consultation to see if your business qualifies for the Employee Retention Credit.
For nearly 30 years, I have helped businesses of all sizes find workable solutions to their complex financial problems. Whether as a Senior Credit Officer offering unique, out of the box, solutions to meet the financing needs or as a private business owner dealing with the mundane, everyday issues to the extremely complicated world of tax increment financing, my goal is always the same; find the best solution for the client in the most timely manner.
Education and Qualifications:
I graduated from UT in 1998, double major (Accounting/Finance)
I graduated from the Southern School of Commercial Lending in 1999
I graduated from Louisiana State University School of Banking in 2004 (Master’s Degree in Banking)
I am local. I am not an 800 number. My phone number is 865-705-7142. You call, I answer.
Reach out to me today and I’ll be in touch to schedule your complimentary consultation.