The employee retention tax credit was introduced as a part of the Coronavirus Aid, relief, and Economic Security act passed in 2020. through this tax credit, employees could receive an amount ranging from $7,000 per employee per quarter in the form of refundable tax credits. This Act also offered $5000 per employee for 13th March to 31st December 2020.
As per financial experts, the ERC offers a great opportunity for struggling businesses that are finding it tough to maintain their employees on the payroll. The creation of the ERC and other changes brought about by this program have given a chance for businesses to be back on their feet. To know how to claim employee tax credit retroactively, here are the steps that you need to follow.
Who are eligible for ERC?
The majority of the employers, irrespective of their size may qualify for this type of credit. However, there are two conditions based on which you may qualify:
- You need to be either fully or partially suspended from work due to government orders. The credit will only be applicable on that part of the quarter when your business was suspended. You won’t get help for an entire quarter.
- You may have had a noteworthy decline in gross receipts. The fall has to be more than 50% for a quarter in 2020 as against the same quarter in 2019.
What are the wages that qualify for ERC?
Generally speaking, the wages that qualify for employee retention tax credit are those that are subject to FICA taxes along with those that qualify for health expenses, including dental, medical, and vision. The wages need to be paid after 12th March 2020 and 1st October 2021.
Businesses that have an average of 100 or fewer employees in the year 2019, can capture all wages in 2020 and 2021 for the time through which the business qualifies for ERC.
What is claiming of ERC retroactively?
The only positive news for staffing firm owners is that the end of this program doesn’t have an effect on the ability to claim ERC retroactively. These businesses have a minimum of 3-year SOL from filing Form 941 to determining the qualifying wages.
If you are someone who has still not sought advantage of the ERC, you still have enough time to do so. Check your eligibility and speak with a qualified partner who can assist you throughout the procedure.