What Does the Employee Retention Tax Credit (ERTC/ERC) Extension Mean to Small Business Owners in 2021?

The Employee Retention Tax Credit (ERTC), also referred to as ERC, was updated for 2021. Some benefits expired at the end of June, 2021, but Payday Masters can likely still capture benefits to which you’re entitled. Read on for general advice and call us if you think you may be eligible for ERC credits or other pandemic related benefits.

What is the ERTC Credit and What Does it Do?

The ERC is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It was passed to help businesses keep employees working through the worst of the pandemic. Functionally, the law provides relief to eligible businesses that paid qualified wages, benefits and retained employees.

Eligible employers can claim a tax credit against selected wages, employment taxes, health plan costs together with the employer’s share of Social Security and payroll taxes.

Your business may be eligible for ERC if it experienced a pandemic-related decline in gross receipts and was actively involved in a trade or business during the calendar quarter for which you claim ERC. New ventures and recovery businesses may be eligible for benefits, too.

Which Businesses are Eligible for ERTC Credits?

1. Your trade or business experienced a full or partial suspension of operations from January 1, 2021, through June 30, 2021 due to COVID-19 government regulations or health orders regarding travel, commerce or group meetings.

2. Your business experienced “A decline in gross receipts”, defined as:

1. For a 2021 comparison, the gross receipts of either or both of the 2021 calendar quarters are less than 80% of the gross receipts in the same calendar quarter of 2019 .

2. For the 2020 comparison year, your gross receipts in 2021 need to be 50% less than 2020 on a quarterly basis.

You’ll Likely Qualify for the Benefit If…

1. You have 500 or fewer full-time employees (FTE’s) who work at least 30 hours per week or at least 130 hours per month.

2. Your gross receipts declined in that quarter.

3. You paid employees during work suspension (whether they worked or not).

4. For example, if you own a restaurant with less than 100 employees and continued to pay them during lockdown, you would likely qualify for ERT credits.

How to claim the ERC?

1. Eligible employers can report health insurance costs and qualified wages for each quarter using Form 941.

2. Small businesses can request advance payment of the credit via Form 7200, Advance of Employer Credits Due to Covid-19

3. Businesses that got Paycheck Protection Program (PPP) loans need to differentiate ERC benefits from PPP benefits because double dipping isn’t permitted.

It May Pay to be Persistent

In May of 2021, the White House reported more than 30,000 small businesses claimed more than $1 billion in credits. Self-employed people, LLCs, S Corporations and C Corporations have all qualified for the ERTC.

Disclaimer: Eligibility programs, qualifications and wage calculations are clearly defined. However, implementation rules may still change. But, it is possible to claim the ERTC 2020 even after you have filed 2020 taxes. Getting professional tax advice from qualified tax preparers like Payday Masters is a great way to see if you qualify. Please call us at 866-40-PAYDAY or write info@payday-masters.com

For further information, please review the IRS FAQ section regarding the ERTC.

SOURCES

https://cdn.newswire.com/files/x/26/ad/790193ea9b576b9f408e3467afcb.png

https://www.irs.gov/newsroom/new-law-extends-covid-tax-credit-for-employers-who-keep-workers-on-payroll

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-determining-qualified-wages-faqs

https://www.cnbc.com/2021/05/12/biden-is-encouraging-eligible-businesses-to-take-advantage-of-this-big-tax-break.html

https://restaurant.org/articles/news/ertc-for-small-business-expanded-to-include-2021

https://www.entrepreneur.com/article/364519

other acts: https://www.adp.com/spark/articles/2021/06/reminder-new-employee-retention-tax-credit-provisions-take-effect-july-1-2021.aspx

https://www.njcpa.org/article/2021/01/15/the-ins-and-outs-of-the-employee-retention-credit

The American Rescue Plan Act was extended in March 2021 to help small businesses and their employees get through the worst of the pandemic. You could access up to $7,000 ERTC, per quarter for all of 2021 per eligible employee, if eligible. This also increases the per employee maximum to $28,000 per year.

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-general-information-faqs