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Employee Tax Credit

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Published on June 10, 2022
 

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YOU MAY HAVE UNCLAIMED EMPLOYEE RETENTION TAX CREDITS

We’ve sprung forward, the birds are chirping, and buds are on the trees. While these are all welcome signs of spring, they’re also indicators that tax time is just around the corner!

This year’s tax deadline is Monday, April 18. If you’re a business owner who has yet to file your 2021 taxes, we want to make sure you’re aware of an important credit that’s available to you.

The Employee Retention Credit (ERC)is a refundable payroll tax credit for “qualified wages” paid to retained full-time employees during periods in 2020 and 2021.

According to Investopedia, “the purpose of the ERC is to encourage employers to keep employees on the payroll, even if they are not working during the covered period due to the effects of the coronavirus outbreak.”


Do I qualify?
Here’s what you need to know as an employer to take advantage of this credit. 

  • The updated Employee Retention Credit (ERC) provides a refundable credit of up to $5,000 for each full-time equivalent employee you retained from March 13, 2020, to Dec. 31, 2020, and up to $14,000 for each retained employee from Jan. 1, 2021, to June 30, 2021.

  • You qualify as an employer if you were ordered to fully or partially shut down or if your gross receipts fell below 50% for the same quarter in 2019 (for 2020) and below 80% (for 2021).

  • If you were not in business in 2019, then you could use the corresponding quarters from 2020.

  • You can claim your credit immediately by reducing payroll taxes sent to the Internal Revenue Service (IRS).

  • If your credits exceed payroll taxes, then you can request a direct refund from the IRS.

Employers who received Paycheck Protection Program loans can claim the ERC for qualified wages not treated as payroll costs in obtaining forgiveness of the PPP loan.


Log on to the IRS website

  • The IRS website has all the information business owners need to determine what “qualified” wages are and the forms needed to claim credits.

  • Click here for a complete list on how to file and find the correct forms.

 

As always, we recommend that you  speak with a financial professional to see if you qualify to receive these tax credits and how they could affect your full financial portfolio.


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