- Barry Boscoe
Employee Retention Credit
If you have not heard of, or explored how you can take advantage of the Employee Retention Credit, then you may be missing out on refunds worth hundreds of thousands of dollars to you and your company.
The employee retention credit (ERC) is a tax credit first introduced in the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 and has since been extended and expanded by subsequent legislation. To date my associated firm has been in this space now for over two years and we have filed for over $300,000,000 in refunds and have worked with over 300 clients.
The ERC is available to businesses of all sizes, including tax-exempt organizations, but the credit amount and eligibility requirements vary depending on the size of the business. For example, businesses with 500 or fewer employees can claim the credit for all wages paid to employees during the eligible period, while larger businesses can only claim the credit for wages paid to employees who were not providing services due to the pandemic.
The ERC is a refundable payroll tax credit that can be as high as $5,000 per employee in 2020 and as high as $21,000 per employee in 2021 totaling up to $26,000 per eligible employee.
To be eligible, there are two tests which employers can meet independently. 1) employers must have experienced a significant decline in gross receipts. Most companies we have worked with did NOT have a gross revenue reduction. 2) Employers must have experienced a Partial Suspension of Business. Most employers meet this test which, in essence, if your organization experienced a disruption in revenue-creating operations (even non-essential ones) that met or exceeded 10%, you qualify under the terms of “partial suspension.” In this case, your organization experienced something more than a “nominal impact” to business operations due to a 10% or greater reduction in total hours of operations or total revenue-creating operations. This 10% or greater threshold can also apply to the impact on sales/gross receipts. Operational or hours-related disruptions are equally acceptable conditions for the partial suspension qualification. These guidelines are primarily dictated by the IRS’ Notice 2021-20. There are hundreds of examples as to how you may qualify as it relates to your specific organization.
The ERC is a refundable tax credit calculated based on the qualifying wages paid to employees during eligible employer status. For most companies taking advantage of this program, the refundable tax credits are well in excess of the payroll taxes paid by the employers. ERC benefits can be larger than the amounts a company received in PPP funding. You can qualify even if you took PPP money.
The ERC has been expanded several times since its introduction. In the Consolidated Appropriations Act of 2021, the credit was extended through June 30, 2021, and the eligibility criteria were relaxed to allow businesses that experienced a 20% decline in gross receipts to claim the credit. The American Rescue Plan Act of 2021 further extended the credit through September 30, 2021, and increased the credit amount to $7,000 per employee per quarter.
Overall, the employee retention credit has been a valuable tool for businesses struggling to weather the economic impact of the COVID-19 pandemic. By providing a tax credit, the ERC has helped to preserve jobs and support economic recovery.
If you would like to further explore how you might qualify for the ERC Refund Program please contact me at 818-342-9950 or firstname.lastname@example.org. You may also use my calendar link below to set a time that works best for you.
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