Own a business open in 2020 or 2021 with 5+ Employees? You are eligible!
The Employee Retention Credit (ERC) is a payroll tax refund from the United States Treasury Department that became available on April 1, 2020. The credit is applicable to businesses who kept employees on payroll during the pandemic. In this blog post, we will discuss what the ERC is and how you can claim it!
The Employee Retention Credit is a refundable tax credit of up to 50% of employee wages, up to a maximum of $5,000 per employee. The credit is available for employee wages paid between March 12, 2020 and December 31, 2020. However, employers with more than 100 full-time employees must exclude employee wages paid after December 31, 2020 in order to be eligible for the credit.
In order to be eligible for the ERC, an employer must meet either of two criteria:
1) Experiencing significant decline in gross receipts of at least 20 percent compared to the same quarter in 2019; or
2) Fully or partially suspending operations due to orders from an appropriate governmental authority due to COVID-19.
To claim the credit, employers must file Form 941 for each quarter. Employers can also request an advance payment of the employee retention credit from their payroll processor or by filing Form 7200 with the Internal Revenue Service (IRS).
The Employee Retention Credit is a valuable tool for businesses to reduce employee costs and keep employees on payroll during this difficult time. Businesses should consult with their financial advisors or tax preparers to determine if they are eligible for the ERC and how best to take advantage of it. The IRS website is also a great resource for more information about the ERC. With careful planning, businesses can maximize their employee retention credits and ensure that their employee wages remain steady during the current crisis.
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