In an effort to support our Smart Link Solutions clients, we have some intel to share about an Employee Retention Tax Credit (ERTC), a government stimulus program available to business owners and organizations.
If you haven’t heard about the initiative, we are not surprised. The incentive plan has not received much press! The ERTC is a refundable tax credit of up to 50% of qualifying salaries against certain employment taxes. Eligibility allows a business owner the ability to reduce the amount of required employment tax deposits. In addition, if the employer’s employment tax payments do not cover the credit, the IRS may make a payment in advance. If your business or organization qualifies, you can take advantage of it immediately.
The tax credit equals 50% of a qualified employee’s credit up to $5,000 per employee in 2020 and a max credit of $28,000 per employee in 2021. Each employee could potentially be worth up to $33,000 in a cash refund from the Internal Revenue Service.
So, who is eligible for Employee Retention Tax Credit (ERTC)?
According to the IRS, employers including tax-exempt organizations or businesses, are eligible if they owned a trade or business during the 2020 calendar year and experienced these qualifying situations:
- A full or partial suspension of trade or business operation during any calendar quarter due to governmental orders which limited commerce, sales, travel or group meetings due to COVID-19 or a significant decline in gross receipts. The decline must meet the following criteria:
- On the first day of the first calendar quarter of 2020, for which, an employer’s gross receipts are less than 50% of its gross receipts for the same calendar quarter in 2019.
- On the first day of the first calendar quarter following the calendar quarter, in which, gross receipts are more than 80% of its gross receipts for the same calendar quarter in 2019.
The credit is available for qualified earnings, including certain health plan expenses which were paid during these periods or during any calendar quarter in which services were suspended.
The deadline for qualified businesses to claim the ERTC must be filed with the quarterly tax Form 941 due October 31 and December 31, 2021. Business tax filers will be required to attach additional payroll data and documents to properly complete the ERTC prerequisite with their quarterly returns.
While distributed PPP funds are likely to limit the amount of eligible refunds, this is your money and there are NO re-payment attached to these funds.
We are by no means experts in this area but would encourage you to reach out to your accountant or contact the Great Lakes Funding Center.