The Employee Retention Credit (ERTC/ERC) is a fully refundable Internal Revenue Service (IRS) payroll tax credit. The IRS urges employers to take advantage of this credit to help keep employees on the payroll as they try to keep their doors open during the pandemic.
Which businesses qualify for the ERTC/ERC?
This tax credit is now available to various businesses throughout the country who operated a trade or business from January 1, 2021, through June 30, 2021, and experienced a government mandated full or partial suspension of operations or a significant decline in gross receipts.
What does the government consider a significant decline?
The definition varies depending on the year. For the purposes of the ERTC/ERC, the government defines a significant decline in gross receipts for 2020 as less than 50% of their gross receipts for the comparable calendar quarter in 2019. The IRS defines a significant decline in 2021 as gross receipts less than 80% of gross receipts from a comparable quarter in 2019.
What if we just started business and do not have a comparable quarter from 2019?
In these cases, the business could qualify as a recovery start-up business. To qualify, the business must have started after February 15, 2020, and had less than $1 million in gross receipts.
How do we claim the credit?
A business can claim the ERTC/ERC by reporting qualified wages and related health insurance costs for each quarter on the quarterly employment tax returns. For most, this involves the use of Form 941.
What else should our business know about the ERTC/ERC?
Those who are looking to claim the ERTC/ERC are wise to seek legal counsel to discuss compliance. The attorneys at Goldburd McCone can review your company’s eligibility and help to better ensure you receive the best available tax incentives.