Is the ERC Tax Credit still available?

Are you wondering is the ERC tax credit still available? Well, you’re in luck! In this article, we’ll provide you with accurate and up-to-date information about the status of the Employee Retention Credit.

Our goal is to give you relevant and useful details regarding eligibility criteria, application process, and any changes or updates related to the ERC tax credit.

So let’s dive in and find out if your small business is eligible for the ERC tax refund.

What Is The Employee Retention Credit?

The CARES Act in 2020, the Consolidated Appropriations Act in 2021, the American Rescue Plan Act in 2021, and the Infrastructure Investment And Jobs Act in 2021 are key legislative acts that have had an impact on the Employee Retention Tax Credit (ERTC).

It is important to provide accurate and up-to-date information on the status of the ERTC tax credit.

In this discussion, we will explore the eligibility criteria, application process, and any changes or updates related to the ERTC tax credit under these acts.

CARES Act – 2020

Introduced as part of the CARES Act in 2020, the Employee Retention Tax Credit (ERTC) aimed to help businesses keep employees on the payroll during the pandemic.

Qualifying for the ERTC is based on an employer’s 2019 records, with businesses that had 500 or fewer employees being eligible. The application process involves looking back at wages paid after March 12, 2020.

The deadline for filing for the ERTC varies based on when tax returns were submitted. It is important to note that while most businesses’ eligibility ended on September 30, 2021, recovery startup businesses have an exception.

Consolidated Appropriations Act – 2021

To claim the Employee Retention Tax Credit under the Consolidated Appropriations Act in 2021, you must meet certain eligibility criteria based on your business size and decline in gross receipts.

To help you understand, here are some key points:

• Qualifying businesses with 500 or fewer employees in 2019 may be eligible for the credit.
• Gross receipts in a specific quarter of 2021 must be at least 20% lower than the same quarter in 2019.
• The deadline to file for the ERC varies depending on when your tax returns were submitted.
• It’s crucial to gather necessary documents such as payroll records and proof of eligibility when filing for the credit.

American Rescue Plan Act – 2021

Businesses can claim the Employee Retention Tax Credit (ERTC) by filing Form 941-X or Form 944.

For example, under the American Rescue Plan Act of 2021, recovery startup businesses that started their business on or after February 15, 2020, may qualify for the ERTC if their annual gross receipts did not exceed $1 million in 2020 or 2021 and they had more than one W-2 employee excluding family members.

Infrastructure Investment And Jobs Act – 2021

Make sure to familiarize yourself with the key provisions of the Infrastructure Investment and Jobs Act, as it may have implications for your business.

The Infrastructure Investment and Jobs Act does not directly impact the availability or eligibility criteria for the ERC tax credit. However, it’s essential to stay informed about any changes or updates related to the ERC tax credit that may arise in future legislation.

Is My Small Business Eligible for the ERC?

Are you wondering if your small business is eligible for the ERC tax credit?

One very simple eligibility check is this credit is not available to individuals.

One key factor to consider is the number of full-time employees you had in 2019. Additionally, government-mandated full or partial suspensions and a significant decline in gross receipts are also important criteria for eligibility.

If your business is a recovery startup, opened after February 15, 2020, with annual gross receipts under $1 million, there may be additional rules that apply.

Understanding these key points will help determine if your small business qualifies for the ERC tax credit.

Number Of Full-Time Employees

To determine if you qualify for the Employee Retention Tax Credit (ERTC), you need to assess the number of full-time employees your small business had in 2019.

Here’s what you need to know:

1. Definition of a small business: For tax year 2020, a small business is defined as one that averaged 100 or fewer full-time monthly employees in 2019. For tax year 2021, this definition expands to include businesses that averaged 500 or fewer full-time monthly employees in 2019.
2. Larger employers: While small businesses can claim the ERTC for all employees, larger employers can only claim the credit for wages paid to employees not working or for certain qualified health costs.
3. Evaluating eligibility: To determine if your small business qualifies for the ERTC, calculate the average number of full-time employees per month in 2019 and compare it to the thresholds mentioned above.

Government Mandated Full Or Partial Suspension

Below are a few examples to help work out if your business is eligible or not for ERTC due to government mandated full or partial suspension.

For example – an employer that operated an essential business would not be considered to have a full or partial suspension of operations if the governmental order allowed all of the employer’s operations to remain open.

However, an employer that operated an essential business may be considered to have a partial suspension of operations if, more than a nominal portion of its business operations were suspended by a governmental order.

For example, an employer that maintained both essential and non-essential business operations, each of which are more than nominal portions of the business operations, may be considered to have a partial suspension of its operations if a governmental order restricts the operations of the non-essential portion of the business, even if the essential portion of the business is unaffected. In addition, an essential business that is permitted to continue its operations may, nonetheless, be considered to have a partial suspension of its operations if a governmental order requires the business to close for a period of time during normal working hours.

Another example – an employer may be considered to have a full or partial suspension of operations due to a governmental order if, the business’s suppliers are unable to make deliveries of critical goods or materials due to a governmental order that causes the supplier to suspend its operations. If this means that the business’s operations are fully or partially suspended as a result of the inability to obtain critical goods or materials from its suppliers because they were required to suspend operations, then the business would be considered an eligible employer for calendar quarters during which its operations are fully or partially suspended and may be eligible to receive the employee retention credit.

Significant Decline in Gross Receipts

Significant Decline In Gross Receipts

You can qualify for the Employee Retention Tax Credit (ERTC) if your business experienced a significant decline in gross receipts compared to the same period in 2019. To determine eligibility, you need to meet the following criteria:

1. Quarter Comparison: For tax year 2020, your gross receipts for a quarter must be less than 50% compared to the same period in 2019. For the first three quarters of 2021, it means quarterly gross receipts must be less than 80% compared to the same period in 2019.
2. Alternative Quarter Comparison: If your business did not see a 20% decline in gross receipts for the first three quarters of 2021 compared to 2019, you can elect to use the immediately preceding quarter for comparison.
3. Documentation: When filing for the ERTC, make sure to provide accurate records of your gross receipts and any other documentation required by the IRS.

We recommend you stay informed of any changes or updates related to the ERTC by consulting with an ERC Tax Expert or by visiting official sources such as IRS.gov.

Recovery Startup Business

You may be eligible for the Employee Retention Tax Credit (ERTC) as a recovery startup business if you opened after February 15, 2020, and have annual gross receipts under $1 million.

The ERTC was amended in 2021 by The American Rescue Plan to allow recovery startups access to the credit. This means that if you meet the criteria of being a recovery startup business with one or more W2 employees, you don’t have to meet the other eligibility requirements. You can potentially receive up to $50,000 in ERC per quarter.

To claim the credit, file Form 941-X or Form 944 and ensure that all required documents are submitted for proper processing by the IRS.

How Does the Employee Retention Credit Work?

The Employee Retention Credit (ERTC) is a refundable tax credit based on payroll taxes that businesses have paid. It can be claimed for all employees, regardless of whether they worked or not. Here’s how the ERTC works:

1. Calculation of the ERTC – for tax year 2020: eligible small businesses can claim 50% of the first $10,000 in wages per employee, up to $5,000. For the first three quarters of 2021, eligible small businesses can claim up to 70% of the first $10,000 in wages per quarter, up to $21,000 per employee. In total, a small business could potentially receive up to $26,000 in credits per employee for 2020 and 2021.
2. Qualifications for the ERTC: Small businesses with 100 or fewer full-time monthly employees in 2019 qualify for the ERTC in 2020. Small businesses with 500 or fewer full-time monthly employees in 2019 qualify for the ERTC in 2021. Larger employers can claim the ERTC for wages paid to employees not working or for qualified health costs. Businesses must have been impacted by government-mandated lockdowns or a significant decline in gross receipts. Recovery startup businesses that opened after February 15, 2020, with annual gross receipts under $1 million can also qualify.
3. How to Claim the ERTC: Businesses have until April 2024 to amend their 2020 tax filing and until April 2025 to amend their 2021 filing to apply for the ERTC. Qualifying businesses can claim the credit by filing Form 941-X or Form 944.

It’s important to stay updated on any changes or updates related to the ERC tax credit as new laws and regulations may impact eligibility criteria and application processes.

When Is the ERTC Deadline

The deadline for businesses to claim the Employee Retention Tax Credit (ERTC) depends on when they filed their tax returns. Currently, businesses have three years from the date they submitted their original payroll tax returns to determine eligibility for the ERTC. This means that if you haven’t already done so, you can still file for the credit in 2023.

It’s crucial to act quickly once you realize that you qualify for the ERTC. Missing the deadline could mean missing out on potentially thousands of dollars that could help support your business. While the program ended on September 30, 2021, for most businesses, there is an exception for wages paid by recovery startup businesses. The original January 1, 2022, deadline remains in place for those businesses.

To claim the ERTC, qualifying businesses can file Form 941-X or Form 944. It is recommended to gather all necessary documents such as payroll records and proof of eligibility before submitting your application. Keep in mind that changes and updates may occur regarding this tax credit, so staying informed about any modifications or clarifications is essential.

Remember that each business’s situation may vary, so consulting with an ERC Tax Expert is always recommended to ensure accurate guidance throughout this process.

Can I Claim the ERC in 2023?

You can still file for the ERC in 2023 if you haven’t already done so and meet the eligibility requirements. Here’s what you need to know:

1. Eligibility: To qualify for the ERC in 2023, your business must have experienced a substantial decline in gross receipts or a full or partial shutdown due to the pandemic. You will need to look back at the wages you paid to employees after March 12, 2020, to determine if you meet the eligibility criteria.
2. Filing Deadline: You have three years from the date of your original tax return filing or two years from the date the tax was paid, whichever is later, to file for the ERC. This means that if you haven’t claimed the credit yet, you still have time until 2023 to do so.
3. Application Process: To claim the ERC for 2023, you will need to use Form 941-X, which is used for making corrections to previously filed Forms 941. Along with this form, you may be required to submit supporting documents such as payroll records and proof of eligibility.

It’s important to note that accuracy is key. If you have any concerns then we recommend you contact an ERC Tax Expert. There could be serious consequences for your business if you submit an ERC form when you are not eligible. Your business could be audited by the IRS and \or this could result in fines and even prosecution for fraud.

Conclusion

In conclusion, the Employee Retention Credit (ERC) is still available for eligible businesses in 2022 and 2023.

It is important to stay informed about the latest updates and changes regarding this tax credit.

If you have any concerns or doubts we recommend you contact an ERC Tax Expert for guidance and advice.