The Employee Retention Credit (“ERC”) continues to provide a wide variety of firms with sizeable refundable payroll tax savings for qualified wages paid to employees in 2020 and 2021. Businesses can still be eligible for the ERC by submitting an amended Form 941X (Quarterly Federal Payroll Tax Return) for the quarters in which they were an eligible employer.

How does the Employee Retention Credit work?

An employee’s refundable payroll tax credit, known as the Employee Refundable Credit (ERC), can vary from $5,000 in 2020 to $21,000 in 2021.

Who is eligible for the Employee Retention Credit?

This program is open to businesses that suffered partial closures due to government restrictions on trade, travel, or group gatherings as well as those that saw significant declines in quarterly gross sales (as compared to their quarterly gross receipts in 2019).

What kind of salaries is ERC eligible for?

The qualifying salaries paid to employees when the employer was an eligible employer are used to calculate ERC credits. For the vast majority of firms utilising this plan, the refundable tax credits considerably outweigh the payroll taxes paid by employers. ERC’s advantages might be more than the funding from PPPs that a company has received.

Do both large and small firms receive the same benefits from the Employee Retention Credit?

Small employers receive enhanced benefits under the ERC regime. For as long as they were an eligible employer, they might include wages paid to all workers. Large businesses can only include pay paid to employees who do not perform services.

The Employee Retention Credit is only available to full-time employees, right?

No. An employer may take both part-time and full-time employee pay into account when determining the ERC. Only the first $10,000 in salaries and health plan costs that are paid to each employee during a credit-generating period may be used by the employer to calculate the credits. The sole limitation on how the credits are calculated is this one.

How can I tell if a business qualifies as a large or small employer for the Employee Retention Credits?

For the 2020 ERC, a small employer has 100 or fewer typical full-time employees (as determined in 2019).

For the 2021 ERCs, a small employer is one with 500 or fewer full-time employees (as determined in 2019).

Do I automatically become an eligible employer for the full quarter if I pass the Government Mandate Test?

Technically, you do, but you only do so while the requirements are in force and have a significant influence on the company.

Do I have to submit a PPP forgiveness request before an ERC request?

No, but if at all possible, allocate the PPP being forgiven the greatest amount of non-wage permissible costs.

Can I apply for both an ERC and a PPP Loan?

Yes. While an employer is not permitted to factor wages paid with PPP loan proceeds into the ERC calculation, PPP funds are only applicable to wage costs for eight to ten weeks. The ERC has lengthier eligibility periods. PPP loans may also be used to cover non-wage costs.

The development of work papers that distribute PPP funds over the entire 24-week covered period is crucial for ERC purposes.

PPP financing may be used to pay employees who would otherwise not receive any ERC (such as company owners or employees who were paid more than $10,000 during one of the four ERC credit-generating periods).

Your next step is to determine your eligibility for ERC funding.

Contact our team of experts right once to find out if you might be qualified for ERC. To speak with a licenced tax expert right immediately, call us at (fill contact number) or email us a message. The consultation is free.