What is the Employee Retention Tax Credit for Consulting Companies?
The Employee Retention Tax Credit (ERTC) is a refundable payroll tax credit that was introduced in the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020. It is available to eligible employers who experienced a significant decline in gross receipts during a calendar quarter compared to 2019. The ERTC provides a savings opportunity for eligible employers who have retained employees during the COVID-19 pandemic.
Consulting companies can greatly benefit from the ERTC, which provides a refundable credit of up to $5,000 per employee for businesses with 100 employees or less in 2020, and up to $7,000 per employee for each qualifying quarter in 2021 for businesses with up to 500 employees. The credit is available for the first three quarters of 2021, and employers can receive up to $26,000 per employee for both years. However, the credit is only available for wages paid to employees who are not working for businesses with 101-500 employees in 2020.
Consulting companies that have faced reduced business due to the pandemic and have retained employees are eligible for the ERTC. This article will provide a detailed guide on how consulting companies can qualify for and claim the ERTC, as well as how consulting services can assist businesses with their applications.
How to Qualify for the Employee Retention Tax Credit
To claim the ERTC, consulting companies must meet certain qualifications. Heres a detailed look at the eligibility criteria based on information from Haynie & Company](https://www.hayniecpas.com/erc-consulting/) and the [IRS:
Significant decline in gross receipts
Consulting companies must have experienced a significant decline in gross receipts during a calendar quarter compared to the same quarter in 2019. A significant decline is defined as a 50% or more reduction in gross receipts for the quarter compared to the same quarter in the prior year.
Recovery startup business
Consulting companies that started their operations after February 15, 2020, and have average annual gross receipts of less than $1 million are eligible for the ERTC based on information from Parachor Consulting.
Full or partial suspension of operations
Consulting companies that were fully or partially suspended by a government order during the calendar quarter are eligible for the ERTC based on information from Calvetti Ferguson.
Consulting companies can check their eligibility for the ERTC by using the IRSs eligibility tool on their website.
It is important for consulting companies to keep records of their gross receipts, employee retention, and other relevant information to claim ERTC. The next section will explain how consulting companies can calculate the maximum credit amount they can receive per employee.
How Much Can Your Consulting Company Receive in Employee Retention Tax Credit?
Consulting companies can receive a maximum credit amount per employee for wages paid after March 12, 2020, and before January 1, 2022. The credit amount for each qualifying quarter depends on the number of employees and other relevant factors.
Maximum credit amount per employee
Consulting companies with 100 or fewer employees can receive up to $5,000 per employee for the entire year 2020. For the year 2021, consulting companies with up to 500 employees can receive up to $7,000 per employee for each qualifying quarter based on information from Cost Analysts and YHB CPAs & Consultants.
Consulting companies with more than 100 employees can only receive the credit for wages paid to employees who are not working. This means that consulting companies with 101-500 employees in 2020 are not eligible for the credit, even if they experienced a significant decline in gross receipts.
Maximum credit amount per quarter
Consulting companies can receive up to $7,000 per employee for each qualifying quarter in 2021, compared to $5,000 per employee for the entire year in 2020 based on information from Haynie & Company. The maximum credit amount per quarter is calculated as 70% of qualified wages paid to each employee during the quarter.
Consulting companies can receive up to $26,000 per employee for both years based on information from Cost Analysts. However, to receive the maximum credit amount, consulting companies must meet all the eligibility criteria and have paid qualified wages to the employee for both years.
The next section will explain how consulting services can assist consulting companies with their ERTC applications.
How Consulting Services Can Help Your Consulting Company Claim ERTC
Consulting services can help consulting companies in several ways to claim ERTC. Here are some of the ways in which consulting services can assist consulting companies:
Calculating the maximum credit amount
Consulting services can help consulting companies calculate the maximum credit amount based on their eligibility and qualified wages paid to each employee during the qualifying quarters. Consulting services can also help consulting companies understand the nuances of the ERTC and ensure they claim the correct credit amount.
Filing for ERTC
Consulting services can help consulting companies properly file for ERTC by providing the necessary documentation and ensuring that all eligibility criteria are met. Consulting services can also help consulting companies track the status of their ERTC applications and address any issues that arise.
Maximizing ERTC
Consulting services can help consulting companies maximize their ERTC by ensuring that all qualified wages are included in the credit calculation. Consulting services can also help consulting companies understand how to apply for ERTC for a partial quarter and how to claim retroactive ERTC for the 2020 tax year.
Expert guidance
Consulting services, such as those provided by Haynie & Company](https://www.hayniecpas.com/erc-consulting/) and [YHB CPAs & Consultants, have a team of professional ERC consulting CPAs to assist consulting companies with their applications. Consulting services can provide expert guidance on all aspects of the ERTC and ensure that consulting companies claim the maximum credit amount they are entitled to.
It is important for consulting companies to work with reputable consulting services to ensure that they receive accurate and reliable information about the ERTC. The next section will provide some final tips for consulting companies looking to claim ERTC.
Final Tips for Consulting Companies Claiming ERTC
Here are some final tips for consulting companies looking to claim ERTC:
Keep detailed records
Consulting companies should keep detailed records of their gross receipts, employee retention, and qualified wages to claim ERTC accurately. Consulting companies should also keep track of their ERTC applications and any communication with the IRS.
Work with reputable consulting services
Consulting companies should work with reputable consulting services, such as Calvetti Ferguson](https://calvettiferguson.com/services/tax/specialty-tax-consulting/employee-retention-tax-credit-consulting/), Haynie & Company, and [YHB CPAs & Consultants, to ensure that they receive accurate and reliable information about the ERTC. Consulting services can provide expert guidance on all aspects of the ERTC and ensure that consulting companies claim the maximum credit amount they are entitled to.
Act quickly
Consulting companies should act quickly to claim ERTC as the credit is only available for wages paid after March 12, 2020, and before January 1, 2022. Consulting companies should also file their ERTC applications as soon as possible to avoid any delays or missed opportunities.
Stay informed
Consulting companies should stay informed about any updates or changes to the ERTC. The IRS may issue new guidance or clarifications on the ERTC, and consulting companies should be aware of any changes that may affect their eligibility or credit amount.
Consult with a tax professional
Consulting companies should consult with a tax professional, such as a CPA or tax attorney, to ensure that they fully understand the ERTC and how it applies to their specific situation. A tax professional can provide valuable insights and advice on how to claim ERTC and minimize tax liability.
By following these tips, consulting companies can successfully claim ERTC and receive the maximum credit amount they are entitled to.
Wrapping Up
The Employee Retention Tax Credit can provide significant savings to consulting companies that have experienced a decline in gross receipts or were impacted by COVID-19. By claiming ERTC, consulting companies can receive up to $7,000 per employee for each qualifying quarter in 2021 and a maximum credit amount of $26,000 per employee for both years. Consulting services can help consulting companies calculate and maximize their ERTC, properly file for ERTC, and provide expert guidance on all aspects of the credit.
Remember to keep detailed records, work with reputable consulting services, act quickly, stay informed, and consult with a tax professional to successfully claim ERTC. By following these tips, consulting companies can receive the maximum credit amount they are entitled to and minimize their tax liability.
Thank you for reading our comprehensive guide on Employee Retention Tax Credit for Consulting Companies. We hope you found this article informative and helpful. Check out our other great content on ERTC and tax-related topics.
Frequently Asked Questions
Who is eligible for the Employee Retention Tax Credit for consulting companies?
Consulting companies with a decline in gross receipts or impacted by COVID-19.
What is the maximum credit amount consulting companies can receive for ERTC?
Consulting companies can receive up to $7,000 per employee for each qualifying quarter in 2021.
How can consulting companies calculate their maximum ERTC?
Consulting services can help calculate the maximum credit amount based on eligibility and qualified wages paid.
What if a consulting company missed claiming ERTC for the 2020 tax year?
Consulting companies can claim retroactive ERTC for the 2020 tax year.
How can consulting companies maximize their ERTC?
Consulting services can help consulting companies ensure that all qualified wages are included in the credit calculation.
What if the IRS issues new guidance or clarifications on ERTC?
Consulting companies should stay informed about any updates or changes to the ERTC.
