Employee Retention Tax Credit for Construction Companies
The Employee Retention Tax Credit (ERTC) is a payroll tax refund for businesses that kept employees during COVID-19. The ERTC is available to construction companies that had to close or limit capacity due to government closures, supply chain issues, or distancing requirements. This credit can provide significant cash relief in the form of refundable tax credits to construction companies for keeping employees on their payroll throughout the pandemic.
How the ERTC Can Benefit Construction Companies
Construction companies have used the ERTC to cover expenses, grow their businesses, hire talent, pay off debt, and build a safety net. Although many construction companies are missing out on the ERTC due to misconceptions and outdated guidelines, the Consolidated Appropriations Act (CAA), 2021 revised the requirements to make the ERTC more accessible to many more construction companies.
The ERTC is a valuable opportunity for construction companies to receive financial assistance and retain their employees. In the following sections, we will explain who is eligible for the ERTC, how to apply for the credit, how much construction companies can receive, common misconceptions about the ERTC, and why construction companies should apply for the ERTC. We will also provide a real-life example of a construction company that benefited from the ERTC.
Who is Eligible for the Employee Retention Credit
According to Construction Executive are complex and depend on various factors. However, many construction companies may be eligible for the ERTC if they were restricted by government orders or suffered a reduction in gross receipts.
Eligibility Requirements for the ERTC
To be eligible for the ERTC, construction companies must meet the following criteria:
- The company must have been in operation during 2020 or 2021.
- The company must have experienced a full or partial suspension of operations due to a government order related to COVID-19, or a significant decline in gross receipts (i.e., a reduction of 20% or more in gross receipts from the same calendar quarter in 2019).
- The company must have paid qualified wages to employees during the eligibility period, which is from March 13, 2020, to December 31, 2021.
Complexity of ERTC Eligibility
Eligibility for the ERTC can be complex and depends on various factors, including the company's size, the number of employees, and the amount of qualified wages paid. Businesses should research ERTC assistance and ask questions to determine eligibility.
According to Construction Executive, many construction companies have been able to use the ERTC to cover expenses, grow their businesses, hire talent, pay off debt, and build a safety net. However, it is essential to understand the eligibility requirements for the ERTC to determine if a construction company qualifies for the credit.
In the following section, we will provide an overview of the application process for the ERTC.
How to Apply for the Employee Retention Credit
Applying for the Employee Retention Credit (ERTC) can be a complex process, but it is worth the effort for construction companies that qualify for the credit. In this section, we will outline the steps that construction companies should take to apply for the ERTC.
Step 1: Determine Eligibility
Before applying for the ERTC, construction companies should determine if they are eligible for the credit. As we mentioned in the previous section, eligibility for the ERTC depends on various factors, including the company's size, the number of employees, and the amount of qualified wages paid. Construction companies can research ERTC assistance and ask questions to determine eligibility.
Step 2: Gather Required Information
To apply for the ERTC, construction companies must gather the following information:
- Employee wages and hours from 2019 and 2020 or 2021
- Information on government orders that caused a full or partial suspension of operations
- Information on how the company suffered a significant decline in gross receipts
Step 3: Fill Out Form 941
Construction companies can apply for the ERTC on Form 941, which is the Employer's Quarterly Federal Tax Return. The ERTC is claimed on Line 11c of the form. Construction companies can use Form 941 for the first three quarters of 2021 to claim the credit.
Step 4: File Form 941
Construction companies should file Form 941 by the deadline for each quarter. The deadlines are April 30, July 31, October 31, and January 31 of the following year.
Step 5: Receive Refund
If a construction company is eligible for the ERTC, the IRS will refund the credit amount to the company. The credit can be applied against future payroll tax deposits or claimed as a refund.
In the following section, we will discuss how much construction companies can receive from the ERTC.
How Much Can Construction Companies Receive from the ERTC?
The amount of the Employee Retention Credit (ERTC) that construction companies can receive depends on various factors, including the number of employees and the amount of qualified wages paid. In this section, we will discuss how much construction companies can receive from the ERTC.
Maximum Credit Amount
According to Construction Dive, 2021, expanded the ERTC and increased the maximum credit amount to $21,000 per employee.
Calculation of the Credit
To calculate the credit amount, construction companies can use the following formula:
Qualified Wages x 70% x Number of Quarters = Credit Amount
The qualified wages are the wages paid to employees during the eligibility period, which is from March 13, 2020, to December 31, 2021. The credit amount is capped at $7,000 per employee per quarter.
Example Calculation
Here is an example calculation of the ERTC for a construction company:
- The construction company has 50 employees.
- The company paid $1 million in qualified wages during the eligibility period.
- The company experienced a full suspension of operations for one quarter due to a government order.
- The credit amount is calculated as follows: $1 million x 70% x 1 = $700,000.
In this example, the construction company would be eligible for a credit of $700,000.
Refundable Credit
The ERTC is a refundable credit, which means that if the credit amount exceeds the company's payroll tax liability, the excess will be refunded to the company. Construction companies can use the credit to cover expenses, grow their businesses, hire talent, pay off debt, and build a safety net.
In the following section, we will discuss some common misconceptions about ERTC eligibility for construction companies.
Common Misconceptions About ERTC Eligibility for Construction Companies
Many construction companies are missing out on the Employee Retention Credit (ERTC) due to misconceptions and outdated guidelines. In this section, we will discuss some common misconceptions about ERTC eligibility for construction companies.
Misconception 1: PPP Loan Recipients are Ineligible for the ERTC
According to Construction Dive loans in 2020. However, subsequent legislation made the ERTC available to more ailing businesses, including those who received PPP funds. Construction companies that received PPP loans may still be eligible for the ERTC if they meet the eligibility requirements.
Misconception 2: Only Large Companies are Eligible for the ERTC
Contrary to popular belief, the ERTC is not only for large companies. According to Alliant Group, many small businesses and contractors are missing out on the ERTC because they believe that only large companies are eligible. However, small businesses and contractors may be eligible for the ERTC if they meet the eligibility requirements.
Misconception 3: Eligibility is Based on Full Suspension of Operations
Another common misconception about ERTC eligibility for construction companies is that eligibility is based on a full suspension of operations. However, according to AskFrost, even a partial suspension of a construction company by the government may be eligible for the ERTC.
Misconception 4: Eligibility is Based on a 50% Reduction in Gross Receipts
Previously, eligibility for the ERTC was based on a 50% reduction in gross receipts. However, the CAA has revised the requirements so that a 20% reduction now qualifies. According to Alliant Group, many construction companies are missing out on the ERTC because they believe that they do not qualify for the credit due to a misconception about the eligibility requirements.
In the following section, we will provide some final thoughts on the ERTC for construction companies.
Final Thoughts on the ERTC for Construction Companies
The Employee Retention Credit (ERTC) can provide significant cash relief in the form of refundable tax credits to construction companies for keeping employees on their payroll throughout the pandemic. In this section, we will provide some final thoughts on the ERTC for construction companies.
Take Advantage of the ERTC Before It's Too Late
As we mentioned earlier in this article, awareness of the ERTC among construction companies is only at about 30%, and many are unaware that they may be eligible. Therefore, it is important for construction companies to take advantage of this opportunity before funds run out or the three-year claims window closes. Construction companies that have not yet applied for the ERTC should do so as soon as possible to avoid missing out on this valuable tax credit.
Consult with a Tax Professional
Applying for the ERTC can be a complex process, and construction companies that are unsure about their eligibility or the application process should consult with a tax professional. A tax professional can help construction companies navigate the eligibility requirements, gather the required information, and fill out the necessary forms.
Use the Credit Wisely
Construction companies that receive the ERTC should use the credit wisely. The credit can be used to cover expenses, grow their businesses, hire talent, pay off debt, and build a safety net. Construction companies should consider their financial goals and use the credit to achieve those goals.
Keep Up with Changes in the ERTC
The ERTC has undergone several changes since it was first introduced, and construction companies should keep up with those changes. Congress has expanded the ERTC in 2021 to make it accessible to many more construction companies, and there may be additional changes in the future. Construction companies should stay informed about changes to the ERTC to ensure that they are taking advantage of all available tax credits.
In the final section of this article, we will summarize the key points about the ERTC for construction companies.
Key Points to Remember
In this article, we have discussed the Employee Retention Credit (ERTC) and how it can benefit construction companies during the COVID-19 pandemic. Here are the key points to remember:
The ERTC is a Payroll Tax Refund for Businesses that Kept Employees During COVID-19
The ERTC is a payroll tax refund for businesses that kept employees during COVID-19. Construction companies that kept employees on their payroll throughout the pandemic may be eligible for the ERTC.
Eligibility is Complex and Depends on Various Factors
Eligibility for the ERTC is complex and depends on various factors, including the number of employees, the amount of qualified wages paid, and the eligibility period.
Construction Companies Can Receive Significant Cash Relief from the ERTC
Construction companies can receive significant cash relief from the ERTC in the form of refundable tax credits. The credit amount depends on various factors, including the number of employees and the amount of qualified wages paid.
Common Misconceptions About ERTC Eligibility for Construction Companies
There are several common misconceptions about ERTC eligibility for construction companies, including the misconception that only large companies are eligible and that eligibility is based on a full suspension of operations.
Take Advantage of the ERTC Before It's Too Late
Construction companies that have not yet applied for the ERTC should do so as soon as possible to avoid missing out on this valuable tax credit. They should also consult with a tax professional, use the credit wisely, and keep up with changes in the ERTC.
By keeping these key points in mind, construction companies can take advantage of the ERTC and receive significant cash relief during the COVID-19 pandemic.
Ready to Take Advantage of the ERTC for Your Construction Company?
The Employee Retention Credit (ERTC) can provide significant cash relief to construction companies that kept employees on their payroll throughout the COVID-19 pandemic. If you are a construction company owner or manager, it is important to take advantage of this valuable tax credit before it's too late.
At ertcguy.com, we provide valuable resources and information for construction companies looking to improve their business practices, including information about the ERTC and other tax credits. Check out our other great content to learn more about how to improve your construction business.
Don't miss out on the opportunity to receive cash relief through the ERTC. Consult with a tax professional and apply for the ERTC as soon as possible to take advantage of this valuable tax credit.
Q & A
Who is eligible for the employee retention tax credit for construction companies?
Construction companies that kept employees on their payroll during COVID-19.
What is the employee retention tax credit for construction companies?
It is a payroll tax credit for businesses that kept employees during COVID-19.
How much can construction companies receive from the employee retention tax credit?
The maximum credit allowable under the ERC is $21,000 per employee.
Who can help a construction company apply for the employee retention tax credit?
A tax professional can help a construction company navigate the application process.
What are some common misconceptions about the employee retention tax credit for construction companies?
One common misconception is that only large companies are eligible.
How can construction companies use the employee retention tax credit?
The credit can be used to cover expenses, grow their businesses, and build a safety net.
