Are You Eligible For Economic Retention Credits?
If you own a business that suffered a significant decline in gross receipts or was temporarily shut down due to the COVID-19 pandemic, you may be eligible for economic retention credits. This refundable credit can help reduce your payroll tax liability and offer relief from COVID-19-related expenses.
ERC qualifying and extension adjustments have made this credit more accessible to more enterprises. Learn more about this IRS incentive and how to file for it today. The CARES Act
The CARES Act, signed into law by President Trump on March 27, 2020, provides significant financial support to states and local governments as they grapple with the coronavirus pandemic. Without this support, states would have had to begin cutting basic core services very quickly or enact tax increases that could worsen the recession and delay recovery.
One of the most significant aspects of the CARES Act is its commitment to help people in crisis through homelessness prevention and unemployment assistance expansions. These funds can help increase shelter capacity, provide medical care for individuals who may have contracted the virus, and pay for short-term rental or utility assistance so that people in need don’t lose their homes or access to public services like electricity and water.
However, while these funds will help a lot of people in the coming months, they will not be enough to address the needs that the coronavirus pandemic is creating. Policymakers need to look beyond the CARES Act and expand emergency assistance grants for food, housing, health coverage, and other urgent needs that will arise as the pandemic continues.
While this relief will make a difference in the near term, it is not enough to meet the emergency needs that are likely to emerge over the course of the next year and a half as the coronavirus pandemic continues to unfold. Without additional funding in subsequent bills, we will be left to face a prolonged period of economic decline and strained state budgets.
Among the key provisions of the CARES Act that affect employers is its provision of employee retention credits (ERCs). These tax credits can be used by certain hard-hit businesses to offset the federal income taxes that they would otherwise have to pay if they had suspended their business operations during the COVID-19 pandemic.
The ERCs are refundable and equal to 50% of the qualified wages (including allocable qualified health plan expenses) that an eligible employer pays its employees. The ERCs can be claimed against both the employer and employee income taxes, with no limitations on the number of employees that qualify. The COVID-19 Pandemic
A coronavirus causing severe acute respiratory syndrome (SARS-CoV-2), also called COVID-19, is spreading rapidly across the globe. The disease is a highly contagious infection that can affect adults and children alike, with symptoms including a loss of taste or smell, coughing, and fever.
As the virus spreads, healthcare providers have been forced to close or reduce services in many areas. Independent physician practices have been affected by declining patient volumes, and some hospitals are struggling to fill patient appointments.
Buy-here, pay-here dealerships have been hit hard by the pandemic as well. This is causing them to struggle with cash flow issues and financing pressure, as well as making it harder to secure the financing they need for operations.
However, some dealers are finding ways to overcome these challenges and continue operating. Some have opted to seek out financial relief through the Paycheck Protection Program (PPP) or through lease concessions from their landlords.
Another option is the Employee Retention Credit, which has been expanded to offer a refundable tax credit for up to 70% of wages paid to employees who remain on their employer's payroll during this time of economic hardship. For employers who averaged 100 or fewer employees in 2019, all qualified wages are eligible, regardless of whether they were furloughed or suffered reduced hours because of the employer's closure.
The IRS has released a new guidance document describing these changes, which are effective for the 2020 tax year. It includes information about the impact on existing ERCs, as well as information about how to claim and compute this credit.
In addition to these economic relief programs, there are a number of other business and tax incentives that may be available. As the effects of COVID-19 continue to unfold, businesses need to be sure they're taking advantage of all that is available to help them survive and thrive. As a result, we've compiled a list of the best business and tax resources to help you navigate this difficult period. We hope you find it helpful! Please reach out with any questions or concerns you have. Eligibility
Businesses of all sizes that shut down or had a significant decrease in gross receipts during the COVID-19 pandemic may qualify for economic retention credits, which are available to help them cover their business expenses. This program offers a refundable tax credit, which means it can return several thousand dollars to your business each year.
The ERC is based on payroll taxes, which are taxes that employers pay on behalf of their employees. In addition, the credit is retroactive, which means you can claim it even if you paid no income taxes in 2020 or 2021.
To claim the credit, you must complete and file Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, with your quarterly federal tax return. This form is available online and on paper.
You must provide your company's gross receipts from March 12, 2020 to December 31, 2020 (or January 1, 2021 if you are a recovery startup business) as well as the number of qualified wages you paid during that time period. This can include wages from salaried, hourly, or commission employees.
In order to be eligible for the credit, your business must have been impacted by a full or partial shutdown due to a governmental mandate related to COVID-19 or have experienced a significant decline in your gross receipts during a particular quarter compared to the same quarter in 2019. This includes any businesses that were closed, such as restaurants, as well as businesses that socially distanced their indoor dining rooms to cut down on the number of people who visited.
For a company to qualify for the credit, they must also retain employees who worked in the business during the relevant period. In addition, they must have paid their employees at least $600 in qualifying wages during the relevant period.
The credit can be claimed against a company's employment tax deposits and against their federal income tax withheld and social security and Medicare taxes. However, if the employment tax deposits are not enough to cover the expected credit amount, an employer can file Form 7200 (Advance Payment of Employer Credits Due to COVID-19) to request advance payment of their credit. Filing
If your business is impacted by the COVID-19 pandemic, you may be wondering if it’s time to file for economic retention credits. This tax credit, which was created to encourage businesses to keep their employees on payrolls even during periods of government shutdown or gross receipt decline, is available for a variety of employers, including small businesses and non-profits.
While filing for economic retention credits can be a challenge, especially if your business is not familiar with the laws or processes, it is still possible to claim this credit. The IRS allows companies to file amended payroll tax returns up to three years from the original filing date. This is to allow businesses more time to gather data and document their facts and circumstances if they are eligible for this credit.
The employee retention tax credit is refundable up to $10,000 per quarter, depending on the number of employees and wages paid. Qualified wages are those that are not tipped or PTO, vacation or sick pay.
Wages/compensation for which the employer is liable for FICA taxes, or qualified health expenses are also considered to be part of qualified wages. The credit is not limited to recovery startup businesses, however, and can be claimed for the third and fourth quarters of 2021 (recovery startups had until December 31, 2021). ercjob.com
In order to qualify for the employee retention credit, your business must have incurred a partial suspension of its operations due to COVID-19-related mandates or have experienced a significant decline in gross receipts. In addition, you must have not received a Paycheck Protection Program loan.
This type of a decline is defined as a 40% or more drop in gross receipts. You must meet this requirement for each quarter to be eligible for economic retention credits.
If your business is unsure if it qualifies for this credit, consider contacting an experienced tax professional that can guide you through the process of qualifying for economic retention credits. Having a knowledgeable team on your side can save you time and money. Moreover, they can provide guidance on the best way to approach your specific situation and maximize your tax benefits. Choosing an ERC expert can be the difference between claiming your credits or letting them go unclaimed.
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