Tax Tips: Employee Retention Credit
Does your business qualify? What is it?
The Employee Retention Credit (ERC) is a refundable tax credit against certain payroll taxes for wages paid after March 12, 2020 through September 30, 2021. If wages were paid during this time and operations were impacted by COVID-19 as result a reduction in gross receipts or government mandates, you may be eligible.
The CARES Act created the Employee Retention Credit as an option for employers to keep employees on payroll through the pandemic even though revenue had dropped or government mandates restricted operations. For each employee paid up to $10,000 per quarter in 2020 and 2021 there is a 50% and 70%, respectively, credit available. Money in your pocket!
Still don’t know if you qualify?
- When comparing gross receipts in 2020 to 2019 is there a 50% decrease in one of the quarters? If so, you may qualify.
- When comparing gross receipts in 2021 to 2019 is there a 20% decrease in one of the quarters? If so, you may qualify.
- In 2020 were government mandates in place for a specific period of time that affected normal operations of your business? If yes, then you may qualify.
- Were business operations affected by supply chain issues where material that is crucial to production was being upheld? If so, you may qualify. Click here to read ERC Supply Chain article.
This is a very complex topic and there have been several changes to the credit, making it hard to keep current. It is highly recommended that you seek professional guidance when calculating the Employee Retention Credit or deciding if your business qualifies.
Consult with your tax professional at Ketel Thorstenson about this or other tax matters because each situation is different. Don’t navigate the difficult and ever-changing tax codes and legislation on your own. Ketel Thorstenson CPAs and tax professionals receive advanced training and continuing education all year long to keep our service on the forefront of the tax industry. Call us today for guidance on tax planning, tax return preparation, and tax legislation affects or questions.