The Employee Retention Tax Credit
Were you required to limit your business due to Covid-19? If your business was affected during 2020 or 2021, you may be entitled to apply for the Employee Retention Tax Credit. This is a large refundable tax credit provided by the federal government to give relief to fully or partially locked down businesses that kept employees on the payroll.
There are eligibility rules limiting the number of businesses that can participate in these programs, including if your business was forced to close, fully or partially, by order of a government mandate. Did the state or local government mandate businesses like yours close during the lock down in 2020? Did you have to limit your customers to take-out orders only, or were you forced to limit your indoor seating capacity to 50%?
Were you only able to re-open to 100% customer capacity starting in the 2nd quarter of 2021? These limitations on your ability to do commerce the way you typically do means that the government limited your ability to do business in the interest of public health. It also means that the government will compensate you for the payroll you had to pay during that time in the form of the Employee Retention Tax Credit.
How It Works
The Employee Retention Tax Credit is a program whereby businesses can recoup a part of their payroll expenses from 2020 and 2021. It is a refundable tax credit, meaning you will receive a refund check from the IRS once everything is finalized, less any existing tax balances. The refund is 50% of the first $10,000 earned by each eligible employee in 2020, and 70% of the first $10,000 earned by each eligible employee per quarter in 2021.
For example, each employee who made more than $10,000 in wages in eligible quarters in 2020 would add a $5,000 tax credit per employee for the business. Then in 2021, the credit goes up to 70% per eligible quarter. If those employees made more than $10,000 in each of the first three quarters in 2021, they would add a $7,000 tax credit per eligible quarter per employee for the business.
There are some exclusions to eligible wages, such as wages paid to employees from PPP loans. These wages don’t count towards Employee Retention Credit refunds and would be considered double-dipping, so these wages need to be deducted from the wages used to calculate the Employee Retention Credit. This, and other rules regarding eligibility can be difficult to navigate. That is why it is best to have someone in your corner that understands how to get you the maximum refund for your business.
We Can Help You – We Do The Work, You Get The Check!
Employer Incentives can help you. We can determine your eligibility for each quarter in 2020 and 2021, review your 941 forms and wage reports to determine how much of a credit you would be getting, and perform a detailed analysis including your PPP loans and any other conflicting credits so you don’t double-dip the benefit. Our experienced analysts will produce detailed reports to back up our calculations and fill out the proper IRS worksheets for you, and will complete the necessary forms for you to claim the refund. All you have to do is sign them and send them in to the IRS. We perform this work in advance and we don’t charge you a fee for our work until the IRS sends you your benefit. It truly is risk free. Sign up for a free consultation.