Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help businesses during the pandemic. The law included increased availability of employee retention credits, or tax credits to help small businesses keep their employees even during the most difficult portions of the pandemic. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 further increased these credits and the Internal Revenue Service (IRS) urges employers to take advantage of “newly extended” credits.
What should I know about the Employee Retention Credit (ERC)?
It is a refundable tax credit. Initially, the government set it up at 50% of $10,000 in wages. But in 2021, lawmakers raised the credit to 70%. As a result, the credit is worth up to $7,000 per quarter and up to $28,000 for 2021. Even more beneficial, if the ERC is more than what the employer paid in payroll taxes for each quarter, the government will refund the excess.
Who qualifies?
Business with 500 or fewer employees in 2019 with gross receipts in 2021 20% lower per quarter compared to the same quarter in 2019. Those with 100 or fewer employees could qualify for a 100% employee wage credit.
How do I apply for the ERC?
First off, it is not too late. Businesses who qualify can get a retroactive refund. However, it is important to note that the ability to use this credit retroactively is not indefinite. Businesses must take the credit within three years of the filing date.
The attorneys at Goldburd McCone LLP are familiar with ERC and other tax credits for small businesses. They can provide counsel and help to better ensure your business navigates these and other tax issues wisely.