As the COVID-19 pandemic continues to affect businesses across the globe, many companies are struggling to stay afloat. To help alleviate some of the financial burden, the government has established various programs, one of which is the Employee Retention Tax Credit (ERTC or ERC). ERC is a valuable program that provides businesses with the opportunity to save costs, support employees, have flexibility in use, claim it easily, and be available to a wide range of businesses. In this blog, we’ll explore six benefits that businesses can expect when they apply for the Employee Retention Tax Credit.
- Cost Savings
One of the most significant benefits of the ERC is the potential for significant cost savings for businesses. The credit can be used to offset a portion of the wages paid to employees during the pandemic, which can help businesses keep their payrolls intact and avoid layoffs during this recession. This can be especially important for small businesses that have been hit hard by the recent economic downturn.
- Supporting Employees
Another benefit of the ERC is that it helps businesses support their employees during a difficult time. By providing a credit for wages paid, the program helps businesses keep their employees on the payroll and maintain continuity of operations. This can be especially important for employees who have been affected by the pandemic, such as those who have lost their jobs or have been forced to take a pay cut.
- Flexibility in Use
The ERC also provides businesses with flexibility in how they use the credit. Businesses can choose between three ways to claim the credit: File a Form 941s for the past quarter(s) or they can reduce payroll tax deposits by the credit amount determined based on qualified wages.
- Maximum Credit Amount
The maximum credit amount that an eligible employer can gain for 2020 is equal to 50% of 2020 qualified wages with a max of $7000 per quarter. For 2021 it is equal to 70% of 2021 qualified wages with a max of $10,000 per quarter. Additionally, they may qualify for health expenses through the Consolidated Appropriations Act (CAA), as well. The amount of the credit will depend on the number of employees they have and the wages paid.
- Available to a Wide Range of Businesses
The ERC is available to a wide range of businesses, including those in the retail, hospitality, and service industries that have been particularly affected by the pandemic. Additionally, businesses of all sizes are eligible for the credit, which means small businesses and startups can also take advantage of the program.
- Qualification Requirements
To qualify for ERC, businesses must have experienced a total or partial shutdown, a huge decline in gross receipts. Businesses must have also carried on a trade or business or were a tax-exempt organization from January 1, 2021, through September 31, 2021. Additionally, an eligible employer is considered small if they have 500 or fewer average full-time employees (FTEs).
In conclusion, the Employee Retention Tax Credit (ERTC or ERC) is a valuable program for businesses that have been affected by the COVID-19 pandemic. The program provides businesses with the opportunity to save costs, support employees, have flexibility in use, claim it easily, and be available to a wide range of businesses. Businesses facing financial challenges due to the pandemic should explore if they qualify for the ERC and take advantage of the benefits it offers. To find out how the ERC can help your business, contact ERC Opportunities today!