Employee Retention Tax Credit Updates
The Employee Retention Tax Credit (ERTC) is a refundable tax credit designed to help businesses that paid employees during the pandemic or experienced significant declines in gross receipts. As the pandemic continues, the ERTC has been updated to provide more relief to eligible employers. In this article, we will discuss the latest updates to ERTC and what they mean for businesses.
According to CLA Connect, businesses that qualify for ERTC can still file their Form 941X. However, the IRS has warned against scams related to this tax credit, and businesses should be cautious of third-party advice.
In the following sections, we will discuss the recent updates to ERTC, how businesses can claim ERTC, common pitfalls to avoid when filing for ERTC, and resources available to businesses interested in ERTC.
Recent Updates to ERTC
The ERTC has undergone several changes in the past year to provide more relief to businesses impacted by the pandemic. Here are the latest updates to ERTC:
Changes made to ERTC for Q3 and Q4 of 2021
According to the IRS, the latest updates to ERTC include an increase in the maximum credit amount from $5,000 to $7,000 per quarter for each employee. Additionally, the eligibility criteria have been expanded to include recovery startup businesses that began operating after February 15, 2020, and have annual gross receipts of $1 million or less.
Eligibility criteria for ERTC
To qualify for ERTC, businesses must have experienced a significant decline in gross receipts or been impacted by a government order suspending business operations. The following are the requirements for businesses to qualify for ERTC:
Requirements for businesses to qualify for ERTC
- Businesses must have 500 or fewer employees
- Businesses must have experienced a decline in gross receipts of more than 20% in a calendar quarter compared to the same quarter in 2019
- Businesses that were not in operation during the same quarter in 2019 must compare their gross receipts to the same quarter in 2020
Calculation of the ERTC tax credit
According to Paychex, the ERTC tax credit is calculated based on qualified wages paid to each employee. For qualifying wages paid between March 13, 2020, and December 31, 2020, the credit is equal to 50% of qualified wages paid, up to $10,000 per employee annually. For qualifying wages paid between January 1, 2021, and December 31, 2021, the credit is equal to 70% of qualified wages paid, up to $10,000 per employee per quarter.
Categories of businesses that can benefit from ERTC
According to SnackNation, ERTC is available to businesses impacted by the pandemic, with no limit to the number of employees who can be given credit for. Eligible employers include those who have been impacted by COVID-19 and demonstrate at least a 50% drop in gross receipts over the same quarter in the previous year. Business owners may potentially qualify for the ERTC if they own less than 50% of the business or if multiple owners own less than 50% ownership.
How to Claim ERTC for Your Business
If your business is eligible for ERTC, here are the steps to claim it:
Steps to claim ERTC for your business
How to calculate ERTC for your business
To calculate ERTC for your business, you can use the ERTC calculator provided by the IRS. You will need to provide information about your business, including the number of employees and the amount of qualified wages paid.
How to file for ERTC
To claim ERTC, eligible employers must file Form 941, Employer's Quarterly Federal Tax Return. If you have already filed Form 941 and did not claim ERTC, you can file an amended return (Form 941-X) to claim the credit retroactively. The deadline to file amended payroll tax returns is April 15, 2024, for 2020 and April 15, 2025, for 2021.
Important deadlines to keep in mind
Deadline for claiming ERTC for 2020
According to the US Chamber of Commerce, businesses can retroactively claim ERTC until 2024 by conducting a lookback on their payroll during the pandemic and filing an amended tax return. The deadline to claim ERTC for 2020 is April 15, 2024.
Deadline for claiming ERTC for 2021
Eligible employers can claim ERTC for wages paid between January 1, 2021, and December 31, 2021. The deadline to claim ERTC for 2021 is April 15, 2025.
According to Paychex, employers cannot double-dip for ERTC and other tax credits, and they must work with their accountant and payroll specialist for more information on how to claim the credit.
Common Pitfalls to Avoid When Filing for ERTC
While ERTC can be a great relief for businesses impacted by the pandemic, there are common pitfalls to avoid when filing for the tax credit. Here are some of the most common mistakes to avoid:
Not understanding the eligibility criteria
Many businesses make the mistake of assuming they are eligible for ERTC without fully understanding the eligibility criteria. To qualify for ERTC, businesses must have experienced a significant decline in gross receipts or been impacted by a government order suspending business operations. It's important to review the eligibility criteria carefully and ensure that your business meets all requirements before filing for the tax credit.
Failing to keep accurate records
To claim ERTC, eligible employers must keep accurate records of the number of employees and the amount of qualified wages paid. Failure to keep accurate records can result in delays in processing your claim or denial of your claim altogether. It's important to keep detailed records of all wages paid and the number of employees on your payroll during the pandemic.
Double-dipping for tax credits
According to Paychex, employers cannot double-dip for ERTC and other tax credits. It's important to work with your accountant and payroll specialist to ensure that you are not claiming credits that you are not eligible for.
Failing to seek professional advice
Filing for ERTC can be a complex process, and it's important to seek professional advice to ensure that you are filing your claim correctly. Many businesses make the mistake of assuming they can file for the tax credit on their own, without consulting with a tax professional. It's important to work with an experienced accountant or tax specialist who can guide you through the process and ensure that you are claiming the maximum amount of relief available to you.
Conclusion
The Employee Retention Tax Credit (ERTC) has undergone several changes in the past year to provide more relief to businesses impacted by the pandemic. While filing for the tax credit can be a complex process, understanding the eligibility criteria and avoiding common pitfalls can help you claim the maximum amount of relief available to you.
To claim ERTC, eligible employers must file Form 941, Employer's Quarterly Federal Tax Return. If you have already filed Form 941 and did not claim ERTC, you can file an amended return (Form 941-X) to claim the credit retroactively. The deadline to file amended payroll tax returns is April 15, 2024, for 2020 and April 15, 2025, for 2021.
By keeping accurate records, avoiding double-dipping for tax credits, and seeking professional advice, you can ensure that you are claiming the maximum amount of relief available to you. Remember that the rules and eligibility criteria for ERTC can change over time, so it's important to stay up-to-date on the latest updates and changes to the tax credit.
If you are unsure whether your business is eligible for ERTC, or if you need help filing for the tax credit, consider working with an experienced accountant or tax specialist. With their help, you can navigate the complex process of filing for ERTC and claim the relief your business deserves.
Stay Up-to-Date with the Latest ERTC Updates
Keeping up with the latest updates and changes to the Employee Retention Tax Credit (ERTC) can be challenging, but it's important to stay informed to ensure that you are claiming the maximum amount of relief available to you. Here are some resources that can help you stay up-to-date on the latest ERTC updates:
IRS website
The IRS website is a valuable resource for information on ERTC. You can find the latest updates on ERTC eligibility criteria, filing deadlines, and other important information on the IRS website. You can also use the ERTC calculator provided by the IRS to help you calculate the amount of relief you are eligible for.
Business associations
Business associations such as the US Chamber of Commerce and the National Federation of Independent Business (NFIB) can also provide valuable information on ERTC. These organizations often have resources and tools available to help businesses navigate the complex process of filing for the tax credit.
Tax professionals
Working with a tax professional can be a great way to stay up-to-date on the latest ERTC updates. Tax professionals can provide guidance on eligibility criteria, filing deadlines, and other important information related to ERTC. They can also help you prepare and file your tax return to ensure that you are claiming the maximum amount of relief available to you.
Check out our other great content
At ertcguy.com, we are committed to providing businesses with the latest information and updates on ERTC. Check out our other great content to learn more about how ERTC can help your business stay afloat during these challenging times.
Remember, staying up-to-date on the latest ERTC updates is crucial for ensuring that your business is claiming the maximum amount of relief available to you. By using the resources and tools available to you, you can navigate the complex process of filing for ERTC with confidence and ease.
FAQs
Who is eligible for the employee retention tax credit updates?
Eligible employers who experienced significant decline in gross receipts or were impacted by government orders.
What is the maximum amount of relief available for ERTC?
Eligible employers can receive up to 50% of qualifying wages paid from March 13th to October 1, 2021.
How can I claim retroactive ERTC for my business?
Eligible employers can file an amended payroll tax return (Form 941-X) to claim the credit retroactively.
What are some common pitfalls to avoid when filing for ERTC?
Common mistakes include not understanding eligibility criteria, failing to keep accurate records, and double-dipping for tax credits.
Who can I work with to ensure that I am filing ERTC correctly?
Consider working with an experienced accountant or tax specialist who can provide guidance on eligibility criteria and filing deadlines.
How can I stay up-to-date on the latest ERTC updates?
Check out resources such as the IRS website, business associations, and tax professionals. Also, visit ertcguy.com for more great content.
