The deadlines for retroactively claiming the Employee Retention Tax Credit have been extended through 2024 and, for some businesses, through 2025. While the wages you are paying now cannot be counted to claim it, many companies are eligible for additional tax relief that do not know it. What is the Employee Retention Tax Credit, and could your business benefit from it?
What Is the Employee Retention Tax Credit?
The Employee Retention Tax Credit was designed as part of the numerous COVID relief packages the government offers. It was designed to help businesses, and tax-exempt organizations keep workers employed during the pandemic. While many companies were aware of (and took advantage of) the Payment Protection Program (PPP), many remain unaware of ERTC or ERC. The ERC takes the form of a tax credit that helps cover employee wages. Your credit is based on payroll taxes. Because the Employee Retention Tax Credit is refundable, you can get more money back than you put in. For example, if you are eligible for $25,000 through the tax credit and paid $5,000 in payroll taxes, you would qualify for $25,000 in relief.
Do You Qualify?
Only certain businesses are eligible for an Employee Retention Tax Credit. The standards include the following:
- Businesses that were closed due to government orders over the course of the 2020 COVID-19 pandemic or the first three calendar quarters of 2021 or
- Businesses that qualify as a recovery startup business in the third or fourth calendar quarters of 2021 or
- Companies that had a decline in gross receipts during the COVID-19 pandemic in 2020 or the first three quarters of 2021
Additionally, you must have paid wages to your employees. You cannot try to claim the Employee Retention Tax Credit for any wages that you received PPP loan forgiveness for. If you are unsure whether you qualify, working with professionals can help.
How Much Can You Receive?
For the 2020 tax year, you can receive up to 50% of the first $10,000 of wages that you pay per employee. Next, for the first three quarters of 2021, you can receive up to 70% of the first $10,000 of wages you paid each employee. In total, you can get a maximum of $26,000 per employee.
Get the Tax Credits You Deserve
Malden Solutions has a wealth of expertise in providing employer insurance solutions, HR solutions, and individual insurance solutions to businesses both big and small. Our team of seasoned professionals can help you navigate the rapidly-changing world of insurance with ease. We partner with businesses and individuals throughout the country to provide our dedicated services for employee benefits but also work within our surrounding communities in Maryland, Northern Virginia, and Washington, D.C. Contact us today to learn more about how we can provide effective, dynamic solutions for your business. Stay connected with us on Twitter, Facebook, and Linkedin.