Legislation passed to in the wake of the COVID-19 pandemic now allows qualifying companies to take advantage of the Employee Retention Tax Credit (ERTC). This tax credit is applied against payroll taxes for eligible quarters in 2020 and 2021 and is fully refundable. This means that eligible taxpayers will receive a refund check from the government to the extent of total ERTC allowed. Continue reading to find out if your company is eligible for this credit.
How you Qualify for the year 2020:
- The company must show more than a 50% decline in quarterly receipts compared to the same quarter in 2019, or your business must have suffered from a partial or full shutdown by governmental order
- The maximum credit is $5,000 per employee per year.
- This applies to employers with less than 100 employees.
How you Qualify for the First Three Quarters of 2021:
- The company must experience a reduction of at least 20% in receipts as compared to the same quarter of 2019, or your business suffered a partial or full shutdown by governmental order.
- The Credit is 70% of eligible wages paid.
- The maximum credit is $7,000 per employee per quarter.
- This applies to employers with less than 500 employees.
Claiming these credits requires amending Form 941 for the relevant quarters. Companies need to pay close attention to wages allocated toward PPP loan forgiveness when preparing an ERTC claim. No credits can be claimed for wages being allocated toward loan forgiveness. The same consideration needs to be made when analyzing any wages to be claimed towards the Research and Development tax credit.
If you believe that your company may meet the criteria for claiming the ERTC, please contact ATS today. The ATS team will perform all of the services needed to:
- Determine if your company is eligible
- Calculate eligible wages
- Deconflict ERTC wages from PPP and R&D Credit wages (if needed)
- Prepare Form 941-X
- Track the status of any refunds with the IRS
- Handle any communications with the IRS
“Have Alternate Tax Solutions help your businesses leverage Employee Retention Credit”