Almost 100,000 businesses that had to temporarily shut down due to the pandemic are now out of business. If your business survived the government order, you might still be struggling to stay afloat.
It’s not uncommon for establishments to have problems in this economy, but there are ways you can bring in money that doesn’t involve sales. The Employee Retention Credit (ERC) is a strategy for business relief.
Keep reading to learn what to know about ERC.
What Is the Employee Retention Credit (ERC)?
The Employee Retention Credit (ERC) was originally included in the CARES Act but new acts came out to help more businesses. ERC is a refundable credit for businesses to claim on qualified wages from employees.
CARES Act
The CARES Act allows employers to claim a credit against 50 percent of qualified wages paid between March 13 and December 31 of 2020. This was good for up to $10,000 per employee annually.
Consolidated Appropriations Act
After the CARES Act, the Consolidated Appropriations Act was created for businesses in 2021. However, those who qualify can claim a credit against 70 percent of qualified wages paid.
The wage amount to qualify for this credit is $10,000 per employee per quarter instead of per year. It is for the first two quarters of 2021.
American Rescue Plan Act
Because of COVID-19, en ERC program became more common for businesses. Under the American Rescue Plan Act, the credit is 70 percent up to $10,000 per quarter like the Consolidated Appropriations Act.
The difference is that certain startup businesses that opened after February 15, 2020, that had to shut down per government order are allowed a credit of up to $50,000 per quarter.
Who Qualifies for ERC?
Once the American Rescue Plan Act was enacted, most employers qualified for the credit, including the following:
- Colleges
- Universities
- Hospitals
- 501(c) organizations
The Consolidated Appropriations Act expanded qualifications to include PPP loan businesses much as the CARES Act did. It included borrowers from the initial PPP round who did not qualify for the credit before.
ERC is part of business relief plans but to qualify, you have to meet one of two factors. One of the factors must apply in the calendar quarter of the utilized credit. The two factors for eligible employees are:
- Business was partially or fully suspended or business hours were reduced due to government order
- A decline in gross receipts for the employer
You have to continue to pay your workers to qualify for the credit as well. Visit ERC Today to get your Employee Retention Credit if one of the above factors relates to you.
What Wages Qualify?
On the employee payroll, any wages or compensation that are subject to FICA taxes qualify for ERC calculation. Qualified health expenses also apply for the credit.
Keep in mind that the wages had to be paid after March 12 of 2020 and paid through December 31. The credit only takes on wages not forgiven by PPP and not used for other credit types.
Claim Your ERC Today!
The Employee Retention Tax Credit is easy to claim if you are a qualified employer. You’ll need to file a form through your tax return or Claim for Refund to the IRS.
Understand the CARES Act, Consolidated Appropriations Act, and American Rescue Plan Act to decide if you can apply for the credit. Evaluate which credit is best for your business because you can only choose one.
If your business got hit hard by economic changes and the pandemic, claim your wages today. Don’t forget to keep coming back for more articles like this.
