COVID hit businesses hard, and their challenges required them to make difficult choices about employees. Over 11 million workers in the United States were let go because their employers went out of business or couldn’t afford to pay them. The US government introduced the employee retention credit for companies to stop the flow of workers entering unemployment.
The ERC tax credit was designed to help keep skilled workers in their positions by incentivizing their continued employment by providing tax credits to small businesses. Your small business may be eligible for this free money off what you owe to the IRS in taxes.
Luckily, you’re in the perfect spot to learn more about this tax credit, its benefits, and what you must do to become eligible. Continue reading to enjoy the perks of the ERC credit today!
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What Is the ERC Tax Credit?
The ERC tax credit was part of the original CARES Act of 2020. The goal was to allow small businesses to claim 50 percent of wages up to $10,000 per employee between mid-March and December 31st. The tax credit got updated in 2021 to enable small companies to claim 70 percent of wages per quarter for that year.
It’s a refundable tax credit that you’ll gain on employee wages for keeping them employed at your business. The tax credit applies to your payroll taxes rather than income taxes. You’ll still receive this tax credit even if you didn’t pay income taxes in 2020 or 2021.
Since the ERC tax credit is refundable, you can receive money back from what you originally paid in payroll taxes in 2020 and 2021. It’s an excellent way to maintain your company’s flexibility while retaining your loyal skilled workers. Ensure you make the Deadlines for Employee Retention Credit to qualify for the money you’re owed.
ERC Eligibility
The Employee Retention Credit sounds fantastic, but it’s critical to determine if your small business is eligible for the tax relief the CARES Act provides. To qualify, your business must have fewer than 100 full-time employees as of 2019.
The amendment to the ERC Tax Credit extended the tax benefits to companies with fewer than 500 full-time employees. Large corporations can also benefit from the CARES Act. You’re eligible if you paid employees not to work, and your healthcare costs can be reimbursed.
The tax credit also applies to small businesses that started amid the pandemic. You can apply for your startup’s tax credit in quarters 3 and 4 of 2021. Your gross receipts must be under $1 million, and you must have at least one or two W2 employees to qualify.
Get Your Company’s ERC Credit Today
Getting financial help through the ERC Tax Credit makes much sense for small business owners. It’s the reward for retaining hardworking employees during the COVID-19 pandemic.
The Employee Retention Credit helps you get money back for employees who worked for your company through the pandemic, and it’s refundable so that you can access it retroactively. Startups also qualify through amendments to the CARES Act, so get the tax credit your business deserves.
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