The Employee Retention Credit initiative was created because of the pandemic. It was to ensure that employers retained their employees during the pandemic. If you are not already aware of the significance of the Employee Retention Credit, then you are at the right place. We are going to talk about everything you need to know about the newly issued Employee Retention Credit.

What is the Employee Retention Credit?

The Employee Retention Credit (ERC) is a refundable credit available for businesses. It allows businesses to claim wages which can include health insurance costs for employees. This initiative started in March 2020 because of the pandemic, and it is said to continue until December 2021.

The ERC was made to encourage employers to retain their employees on the payroll even if they were not working because of the pandemic. It was included in the Coronavirus Aid, Relief and Economic Security (CARES) Act. It is only eligible for businesses that retain their employees during the pandemic.

Things to Know

Even though the ERC is meant to help businesses, it does not mean every business is eligible. The following are some of the ways a business owner can be eligible for a tax credit.

An employer is not eligible for the ERC if they receive a Small Business Interruption Loan which is under the Paycheck Protection Program (PPP), also under the CARES Act.

Before an employer can claim the new Employee Retention Credit, they have to submit a report of their total qualified wages as well as the related health insurance costs for every quarter available on their quarterly employment tax returns.

What are qualified wages?

Qualified wages are dependent on the number of employees an employer has in their business. They are the wages paid to employees who are not working or providing services because they had to suspend their activities because of the pandemic. The employer is supposed to count only the wages that the employee was supposed to receive when they were working. The qualified wages per employee is maxed out at $10,000 per calendar quarter.

How can one qualify as an eligible employer?

Before you enjoy the Employee Retention Credit, you must be an eligible employer. So how does one become an eligible employer?

• The first thing is that you must have carried a trade or business during the period of March 13, 2020, to date.
• You must have also been partially or fully suspended because of the effects of COVID-19.
• Your business must have received a significant decline in gross receipts. Meaning it is less than 50% of gross receipts for the calendar quarter as compared to the previous year.
• If you are a government of state entity, you are not eligible for the ERC.
• If you were also self-employed, you are not eligible.

How to get the ERC for wages paid 

First, calculate the amount of your credit for the calendar quarter and reduce your Form 941, Employer’s Quarterly Federal Tax Return deposit by the same amount. This method can still be used to date if you still want to get the ERC for wages paid in 2021.:

To read more  https://www.irs.gov/newsroom/treasury-irs-provide-additional-guidance-to-employers-claiming-the-employee-retention-credit-including-for-the-third-and-fourth-quarters-of-2021