What is the Employee Retention Tax Credit for Marketing Agencies?
The Employee Retention Tax Credit (ERTC) is a refundable tax credit aimed at encouraging employers to retain their employees during the pandemic. As a marketing agency, you may be eligible to claim the ERTC, which can provide significant financial benefits. According to Haley Marketing, eligible businesses can receive up to $23,000 per qualified employee. In this article, we will discuss the ERTC in detail and how it can benefit your marketing agency during these challenging times.
Eligibility Requirements for Marketing Agencies
To be eligible for the ERTC, marketing agencies must meet certain requirements. According to the U.S. Chamber of Commerce, private companies must meet one of the following criteria to qualify for the ERTC:
- The marketing agency was fully or partially suspended due to government orders related to COVID-19 during the calendar quarter.
- The marketing agency experienced a significant decline in gross receipts during the calendar quarter.
Deadline for Claiming the ERTC
It's important to note that the deadline for claiming the ERTC has been extended until December 31, 2021. This means that marketing agencies have until the end of the year to claim the ERTC for wages paid from March 13, 2020, to December 31, 2021.
Sources
Throughout this article, we will be referencing the following sources for information on the ERTC:
- Haley Marketing
- U.S. Chamber of Commerce
- Business News Daily
- BDO
How Does the Employee Retention Tax Credit Work?
The Employee Retention Tax Credit (ERTC) is a tax credit that can provide financial relief to marketing agencies that have been affected by the pandemic. The ERTC is a refundable tax credit, which means that if the credit exceeds the amount of taxes owed, the excess amount will be refunded to the marketing agency.
Changes Made to the ERTC Over Time
The ERTC has undergone several changes since it was introduced. According to Business News Daily, the Consolidated Appropriations Act, 2021, made significant changes to the ERTC, including:
- Increasing the credit rate from 50% to 70% of qualified wages.
- Increasing the limit on per-employee creditable wages from $10,000 for the year to $10,000 per quarter.
- Expanding eligibility for the credit by reducing the required year-over-year gross receipts decline from 50% to 20% and providing a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility.
Benefits of the ERTC for Marketing Agencies
The ERTC can provide significant financial benefits to marketing agencies during these challenging times. According to Tax Method Experts, the ERTC can help marketing agencies:
- Reduce their employment tax liability.
- Increase their cash flow.
- Retain their employees.
In the next section, we will discuss the eligibility requirements for marketing agencies to claim the ERTC.
Eligibility Requirements for Marketing Agencies
To claim the ERTC, marketing agencies must meet certain eligibility requirements. In this section, we will discuss the requirements that marketing agencies must meet to qualify for the ERTC.
Gross Receipts Test
According to the U.S. Chamber of Commerce, marketing agencies must meet the gross receipts test to qualify for the ERTC. This test compares the gross receipts of the marketing agency in the calendar quarter to the gross receipts of the same quarter in the prior year. If the marketing agency's gross receipts for the current quarter are less than 80% of the gross receipts for the same quarter in the prior year, the marketing agency may be eligible for the ERTC.
Employee Headcount Test
In addition to the gross receipts test, marketing agencies must also meet the employee headcount test to qualify for the ERTC. According to Haley Marketing, marketing agencies with fewer than 500 employees are eligible for the ERTC. In addition, the marketing agency must not have experienced a full or partial suspension of operations due to a government order related to COVID-19.
Partial or Full Suspension
Marketing agencies may also qualify for the ERTC if they have experienced a partial or full suspension due to a government order related to COVID-19. According to the U.S. Chamber of Commerce, if the marketing agency was fully or partially suspended due to a government order related to COVID-19 during the calendar quarter, the marketing agency may be eligible for the ERTC.
In the next section, we will discuss how marketing agencies can calculate and claim the ERTC.
How to Calculate and Claim the ERTC for Marketing Agencies
Once a marketing agency has determined that it is eligible for the ERTC, it can calculate and claim the credit. In this section, we will discuss how marketing agencies can calculate and claim the ERTC.
Qualified Wages
According to BDO, qualified wages are wages and compensation paid to employees during the period that the marketing agency is eligible for the ERTC. The amount of qualified wages that can be used to calculate the ERTC depends on the number of full-time employees the marketing agency had in 2019.
Calculating the Credit
To calculate the ERTC, marketing agencies can use Form 941, which is the Employer's Quarterly Federal Tax Return. According to Business News Daily, marketing agencies can claim the credit by reporting the credit on their Form 941 and reducing their tax deposits. Alternatively, marketing agencies can request an advance payment of the credit by filing Form 7200, which is the Advance Payment of Employer Credits Due to COVID-19.
Claiming the Credit
To claim the ERTC, marketing agencies must file Form 941-X, which is the Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund. According to Haley Marketing, marketing agencies can claim the ERTC for wages paid from March 13, 2020, to December 31, 2021. The deadline for claiming the credit has been extended until December 31, 2021.
Seeking Professional Assistance
Calculating and claiming the ERTC can be complex, and marketing agencies may benefit from seeking professional assistance. According to BDO, BDO's ERC team and technology solution, Credit Connect, can help marketing agencies identify, substantiate, and document qualified wages for the ERTC.
In the next section, we will discuss the potential risks associated with claiming the ERTC.
Potential Risks of Claiming the ERTC
While the ERTC can provide significant financial benefits to marketing agencies, there are potential risks associated with claiming the credit. In this section, we will discuss the potential risks that marketing agencies should be aware of before claiming the ERTC.
Penalties for Inaccurate Information
According to Tax Method Experts, marketing agencies are ultimately responsible for the accuracy of the information on their tax returns. If marketing agencies claim the ERTC without proper documentation or eligibility, they may face penalties.
Eligibility Requirements
As we discussed in the previous section, marketing agencies must meet certain eligibility requirements to claim the ERTC. If marketing agencies do not meet these requirements, they may be ineligible for the credit and may have to pay back any credit they received.
IRS Scrutiny
The IRS has added ERTC claims to its annual Dirty Dozen list of tax scams due to unethical firms scamming owners who were never eligible for the credit. According to Tax Method Experts, the IRS is cracking down on ERTC claims and taxpayers need to be aware that they may be audited if they claim the credit.
Changes to the ERTC
As we discussed earlier in the article, the ERTC has undergone several changes since it was introduced. According to the U.S. Chamber of Commerce, this can make it confusing to track current eligibility requirements. Marketing agencies should stay up to date on any changes to the ERTC to ensure that they are eligible for the credit.
In the next section, we will summarize the key points that marketing agencies should keep in mind when considering the ERTC.
Key Takeaways for Marketing Agencies Considering the ERTC
In this article, we have discussed the Employee Retention Tax Credit (ERTC) and how it can benefit marketing agencies. Here are the key takeaways that marketing agencies should keep in mind when considering the ERTC:
Eligibility Requirements
Marketing agencies must meet certain eligibility requirements to claim the ERTC. These requirements include the gross receipts test, the employee headcount test, and a partial or full suspension due to a government order related to COVID-19.
Calculating and Claiming the Credit
Marketing agencies can calculate and claim the ERTC by using Form 941 and reporting the credit on their tax return. Alternatively, marketing agencies can request an advance payment of the credit by filing Form 7200. Calculating and claiming the credit can be complex, and marketing agencies may benefit from seeking professional assistance.
Potential Risks
There are potential risks associated with claiming the ERTC, including penalties for inaccurate information, eligibility requirements, IRS scrutiny, and changes to the ERTC.
Seeking Professional Assistance
Marketing agencies may benefit from seeking professional assistance when considering the ERTC. Professional assistance can help marketing agencies identify, substantiate, and document qualified wages for the ERTC.
By considering these key takeaways, marketing agencies can make an informed decision about whether the ERTC is right for their business.
Are You Prepared to Use the ERTC to Save the Most?
The Employee Retention Tax Credit (ERTC) can offer significant financial advantages to marketing agencies that satisfy the requirements for eligibility. Marketing agencies can earn up to $28,000 per qualified employee by adhering to these rules.
In this article, we have discussed the ERTC's eligibility requirements, how to calculate and claim the credit, any potential risks involved in claiming the credit as well as important considerations that marketing agencies should make when thinking about the ETC.
We advise you to seek professional assistance if you are a marketing firm that is thinking about the ERTC to make sure you are eligible for the credit and to assist you in calculating and claiming the credit. Credit Connect, the ERC team and technology solution offered by BDO, can assist marketing agencies in locating, supporting, and documenting ERTC-approved wages.
We sincerely hope that this article has been useful in guiding you through the process of selecting the ERTC for your marketing agency. For more advice and guidance on tax planning and preparation for businesses, be sure to check out our other excellent content.
Questions and Answers
Who is eligible for the Employee Retention Tax Credit for marketing agencies?
Marketing agencies that meet certain eligibility requirements can claim the ERTC.
What is the maximum amount that marketing agencies can receive through the ERTC?
Marketing agencies can receive up to $28,000 per qualified employee through the ERTC.
How can marketing agencies calculate and claim the ERTC?
Marketing agencies can calculate and claim the ERTC by using Form 941 or requesting an advance payment through Form 7200.
Who can marketing agencies turn to for assistance with the ERTC?
Marketing agencies can seek professional assistance from firms like BDO to help them identify, substantiate, and document qualified wages.
What are the potential risks associated with claiming the ERTC?
Marketing agencies may face penalties for inaccurate information or may have to pay back any credit they received if they do not meet eligibility requirements.
How has the ERTC changed over time?
The ERTC has undergone several changes since it was introduced, making it important for marketing agencies to stay up to date on current eligibility requirements.
What are the key takeaways for marketing agencies considering the ERTC?
Marketing agencies should be aware of eligibility requirements, how to calculate and claim the credit, potential risks, and seek professional assistance when considering the ERTC.