In mid-2021, more than 6 million workers were still out of work because of the COVID-19 pandemic. Many business owners are still struggling to come back from the pandemic and are now faced with a recession. If this is you, you may still be eligible to get relief with retention tax credits.
If you aren’t sure what employee retention credits are or if you qualify, keep reading to learn more!
What Is the Employee Retention Credit (ERC)?
During the initial days of the pandemic, Congress passed the CARES Act. Included in this bill was the employee retention tax credit for businesses. The ERC is a refundable tax credit for businesses. Your credit is calculated based upon qualified wages paid to employees if you were either had mandatory shutdowns or had a reduction in quaterly revenue.
In 2021, the Consolidated Appropriations Act was passed. It included an increase in how much businesses were eligible to receive under the credit.
Most companies that took out PPP loans are still eligible for this credit, though they can’t claim the wages used to obtain it during PPP forgiveness.
How Much Are the Tax Credits?
The credit for 2020 included in the CARES Act is for 50% of qualified wages up to $10,000 per employee.
For 2021, the credit was increased it to 70% of qualified wages up to $10,000 per employee per quarter.
Altogether, that’s a refundable credit up to $26,000 per employee!
How Do ERC Tax Credits Work?
A refundable tax credit by the IRS means you get back the credit balance after you file your amended tax return. Businesses claim the credit against paid in payroll taxes, such as federal income tax, medicare, and social security taxes.
Depending on which quater you are filing, any credit balance remaining after taxes is a refundable.
How Long Do I Have to Claim the Employee Tax Credits?
The timeframes for the initial ERC eligibility have ended. To receive a refund, you must amend your existing tax returns as soon as possible. Tax form 941X is used to amend employment taxes for up to three years after filing; therefore, each quater that passes in 2023 will be one less quater of ERC availalbe for you to claim.
Of course, this will vary slightly for each business owner, so if you are unsure, it’s best to discuss this with an expert as soon as possible.
How Do I Claim Employee Retention Tax Credits Retroactively?
To receive the employee retention credits for your business, you must file tax form 941X. This form is required to be filed for each quarter for which you are eligible for the ERC.
If you received a PPP loan and are unsure how to proceed, it would be best to get assistance from an expert before moving forward. This way you maximize your refund and don’t get in hot water with the IRS.
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Now you know more about retention tax credits. If you have any questions, we’re here to help!
We have helped businesses obtian Millions of Dollars in Employee Retention Tax Credits. Contact us today to learn more about how we can assist you.