Employee Retention Tax Credit: What Is It And How To Take Advantage Of It?

As the world of business has been changing rapidly in recent years, so too have the ways in which companies can benefit from government incentives and tax credits. One such incentive is the Employee Retention Tax Credit (ERTC), a significant benefit to companies that have been affected by the COVID-19 pandemic.

The ERTC was designed to provide relief to businesses that have experienced a significant decline in gross receipts due to the pandemic. It is available to eligible employers that have experienced a full or partial suspension of operations due to government orders related to the pandemic, or a significant decline in gross receipts.

What Does the Employee Retention Tax Credit Offer?

The ERTC is a refundable tax credit that is equal to 50% of qualified wages that employers pay to their employees during the pandemic. The credit is available up to a maximum of $5,000 per employee per year. Eligible employers can also receive a credit for health plan expenses that are allocable to the qualified wages.

The ERTC is available for wages paid between March 13, 2020 and December 31, 2020. To be eligible for the credit, employers must have experienced a full or partial suspension of operations because of a government order related to the COVID-19 pandemic, or a significant decline in gross receipts.

Who Is Eligible for the ERTC?

The ERTC is available to all employers, regardless of size. This includes corporations, partnerships, sole proprietorships, and nonprofits. To be eligible for the credit, employers must have experienced either a full or partial suspension of operations because of a government order related to the COVID-19 pandemic, or a significant decline in gross receipts.

The ERTC is also available to employers that have received a loan through the Paycheck Protection Program (PPP), but only if the employer has not already claimed the credit for the same wages.

How Can Employers Take Advantage of the ERTC?

In order to take advantage of the ERTC, employers must first determine whether or not they are eligible. To do this, employers should review their gross receipts for the 2020 calendar year and compare them to the same period in 2019. If the gross receipts in 2020 are less than 80% of the gross receipts in 2019, the employer may be eligible for the credit.

Once an employer has determined that they are eligible, they must then calculate the credit amount. To do this, the employer will need to determine the total amount of qualified wages they paid to employees in 2020, and then multiply that amount by 50%. The employer can then claim the credit on their 2020 tax return.

What Are the Benefits of the ERTC?

The ERTC provides employers with a way to offset the costs of wages paid to employees during the pandemic. The credit is available up to a maximum of $5,000 per employee per year, allowing employers to save a significant amount of money on payroll costs.

The ERTC is also a great way for employers to show their appreciation for their employees. As the pandemic has put a strain on businesses, the ERTC provides employers with a way to reward their employees for their hard work and dedication during the difficult times.

Conclusion

The Employee Retention Tax Credit is a great way for employers to offset the costs of wages paid to employees during the pandemic. The credit is available up to a maximum of $5,000 per employee per year, and is a great way for employers to show their appreciation for their employees. Employers should review their gross receipts for the 2020 calendar year to determine if they are eligible for the credit, and then calculate the credit amount when filing their 2020 tax return.