URGENT ALERT: Your Business May Be Eligible For $26k In Credit
(DailyDig.com) – The Employee Retention Tax Credit was created in response to the key challenges many employers faced in light of the Covid-19 pandemic. As many employees went remote and other businesses struggled to keep employees busy, the government stepped forward to offer the Employee Retention Credit, or ERC, to help encourage employers to keep their employees on the payroll.
The ERC has two forms: the 2020 program and the 2021 program. In 2020, the credit covered up to 50% of eligible wages paid to employees during the period of time between March 12, 2020 and January 1, 2021.
The 2021 ERC, on the other hand, increased to 70% of an employee’s earnings, or as much as $26,000 per employee.
Eligible Wages Under the ERC
According to the ERC, “eligible wages” paid to an employee and covered by the tax credit include wages paid when the employer had to either stop operations due to a government order, or when profits for the quarter were lower than normal. For 2020, that meant periods when overall receipts were less than 50% of what they were during the same quarter of 2019; for 2021, that meant quarters during which overall receipts were less than 20% of what they were during that quarter in 2019.
Is Your Business Eligible?
In order to be eligible for the ERC, employers must meet several key qualifications. You may have the right to claim the ERC if:
1. Your business had to halt operations due to a government order.
During 2020 and 2021, businesses saw significant periods of shutdowns due to government orders. Many businesses had to shut their doors through much of 2020. 2021 saw similar uncertainty, with many businesses forced to cease operations for periods of time due to government-mandated quarantines. If your business had to temporarily halt operations due to a government order, you may qualify for the credit.
2. Your business had to partially halt operations because of government mandates.
While some areas of your business may have been able to continue as usual, you may have had to shut down other operations due to continuing government mandates. For example, you may have needed to close specific locations or stop specific processes because of pandemic-related concerns. If the pandemic saw a partial halt to your business, you may have the right to claim the ERC.
3. You saw declining receipts compared to the same calendar quarter in 2019.
Even businesses that did not have to cease operations outright may have seen immense changes in their profits as a result of the pandemic. Many businesses saw considerably decreased profits. However, the ERC encouraged employers to keep their employees on and continue to pay them despite those challenges. If your business saw that decrease in profits, you may have the right to claim the ERC.
Claiming the ERC in 2022
The IRS is not offering a tax credit for keeping on employees in 2022. However, you can still amend previous years’ tax returns in order to request a refund based on this credit. You may want to take a look at your past returns and make sure you requested the full credit you deserved for shutdowns, drops in profits, and keeping on employees in spite of it all during the early stages of the pandemic.
Knowing what tax credits you qualify for and how to obtain them can prove challenging. However, the ERC can substantially benefit your business. If you qualified for the ERC in 2020 or 2021, but did not claim it as part of filing your taxes, amend your filing and request a refund that will cover those funds.
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