Similar to your business, different companies also felt the impact of the global pandemic. It caused most companies to shut down their operations and even lose the revenue they required to stay afloat.
This is where ERC (employee retention credit) program came in. While the program is over, you can still have a chance to claim a tax credit, provided you meet the necessary requirements and submit all the documents. If you want to learn the documents you may need to submit, you can click here to learn more about everything.
What Employee Retention Credit Is
The IRS chose to include a new tax credit. It enables businesses that retained their workers during the global pandemic to receive a refundable credit for around $10,000 in wages paid. This is none other than ERC.
Unlike other relief programs for Covid-19, the ERC is basically not a loan. Plus, it is not cash that should be tracked or repaid later. This is a check from IRS to support businesses impacted by the current global pandemic.
Before, it was made as an alternative to the PPP program. And you were not allowed to get both of them. However, this has changed. Businesses that got PPP funding may still qualify for employee retention credit.
PPP vs. ERC
While it is part of the CARES (Coronavirus Aid, Relief, and Economic Security) Act, the employee retention credit is not similar to PPP. Rather, it is simply a supplemental credit that a company can miss without knowing.
ERC was aimed at helping businesses retain workforces and, at the same time, avoiding layoffs during the current pandemic. It offers employee credit to every eligible business depending on a certain percentage of health insurance benefits and qualified wages paid to workers.
Determining If You Are Eligible for the Credit
Firstly, you should be an employer of less than 500 W2 workers. This shouldn’t include yourself and your family members.
In addition, you must have been subject to a shutdown ordered by the government or experienced losses in gross receipts.
How to Qualify for ERC
Most entrepreneurs are exhausted and overwhelmed, especially those owning and running small businesses. And it is okay for them to feel so.
Since 20220, things have been tough. However, the constant introduction of state mandates and new legislation has made everything even hard to prepare for a better tomorrow.
As a matter of fact, even programs that were developed to provide relief for small businesses had a share of challenges. Of course, ERC was no different.
Regardless of the challenges, the ERC program has the capability of offering you the kind of financial support you need. You can qualify for the program in two major ways.
You may need to requisite decline in revenues for the eligible quarter. Plus, your businesses should partially or fully suspend the government’s order.
In a Nutshell!
In order to ERC, your eligible business may need to withhold required deposits for payroll taxes. If your business has determined its eligibility after filing Form 941 originally, amended payroll tax results will need to be filed, which may include a request for refunds.