The Employee Retention Act (ERC or ERTC) is a tax credit benefit from the Covid-19 relief bill the CARES act. In total, the credit could be worth up to $26,500 per employee that worked between March 2020 – December 2021. That could be financially vital for small and medium-sized businesses.
To be eligible for the ERC, employers must meet one of the following conditions laid out by the IRS:
- They sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19 during 2020 or the first three quarters of 2021
- The business experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021
- The employer qualified as a recovery startup business for the third or fourth quarters of 2021.
As a business owner, you have until April 15th, 2024, to claim benefits from the 2020 tax and April 15th, 2025, for 2021 claims. To claim your benefits, you will need to fill in the IRS form 941-X and calculate your total wages and healthcare for each quarter of the year you claim. Your ability to claim this credit will end in just over two years.
According to some 2021 research conducted by the National Federation of Independent Businesses inc., about 8% of owners utilized the 2020 credit and about 10% of owners planned to use the tax credit for the first half of 2021. It is crazy the lack of notoriety this CARES act benefit got compared to the Paycheck Protection Program (PPP). The PPP benefit is a loan that could be forgivable whereas ERTC does not require payment if you are qualified. Even if you got the PPP loan, it will not automatically disqualify you from being eligible for ERTC. You just will not be able to claim the same dollars for the same benefit.
Forbes states that ERTC is an $80 billion temporary benefit to small and medium-sized businesses. This has attracted a lot of attention from the private sector and scam artists alike. So, you need to know who will help you and who is trying to get over you. Per the IRS, employers must watch out for large upfront fees, fees contingent on the refund amount, or third parties advising employers to claim benefits when they are not eligible. If an owner claims ERC and later the claim is found to be fraudulent it falls on the owner to repay the entire claim.
If you have any questions about this benefit, please contact a CPA, or reach out to the IRS inquiry line at (800) 829-1040. If you have small business questions or need 1o1 business advice we can point you in the right direction, call us at 800-862-2040.