COVID-19 has caused massive damage to businesses of every size, with many being forced to cut staff or shut down their doors.The Employee Retention Credit can be a lifeline for businesses struggling to stay afloat.
The ERC is a refundable tax credit that businesses can claim on qualified wages paid to employees during the pandemic.The ERC is intended to keep employees employed, even when businesses are unable operate normally.
The ERC may be able to help keep your employees and business afloat if your company has been impacted.To find out more about ERC and to claim, you can either visit the IRS web site, speak with an advisor, or check below.
For a brief reading of what the Employee Retention Credit or ERC is, take a look at this video from the YouTube channel “ERC Specialists”. You can also continue below to read an in-depth explanation of ERC.
-a}
The Employee Retention CreditEmployee Retention Credit Massachusetts
Employee Retention credit (ERC), a refundable income tax credit, is available to businesses for wages paid by them during the COVID-19 epidemic.It was created as part of the Coronavirus Aid, Relief, and Economic Security Act, in March 2020, to help companies keep their employees, despite being unable operate normally.
ERCs can be obtained by businesses of any size, including those exempt from tax.For a business to be eligible, it must have suffered a significant decrease in gross revenues or been partially or completely suspended by a government order related to COVID-19.
The ERC is able to provide significant financial support for businesses affected by the pandemic.It can help businesses to retain employees, pay for payroll, and invest in the future.
Why was ERC formed?
The COVID-19 outbreak caused an economic slump that led many businesses, including small and large ones, to either lay off staff or shut down.The ERC was created to help businesses keep their employees on payroll so that they could quickly reopen and resume normal operations once the pandemic subsided.
ERC Benefits
ERC can offer a significant boost in financial support to businesses impacted negatively by the pandemic.It can assist in keeping employees on board, which will help the business recover quickly.
The ERC is also a refundable credit. This means that businesses are able to claim it, even if there are no taxes due.Businesses may also claim ERCs on qualified wages for employees who cannot work because of COVID-19. These employees include those who are furloughed. Employee Retention Credit Massachusetts
The Impact of the ERC in the Business and Economy
The ERC is credited with keeping millions of Americans at work during the COVID-19 outbreak.It also helped companies to weather the economic storm and remain afloat.
ERC was estimated to have saved 10 million jobs and prevented thousands of businesses from closing.It also contributed to the recovery of the economy by increasing consumer spending, and investing.
> > Click Here to Find Out if You Are Eligible for ERC< <
Eligibility
The Employee Retention Credit (ERC) can be claimed by businesses that have suffered a decline in gross sales or been suspended because of a COVID-19 government order.
The test for a decline in gross receipts is the main difference between 2020 and 2021 ERC.In 2020, a business must have experienced a significant decline in gross receipts of at least 50% compared to the same quarter in the previous year.In 2021, an organization must have suffered a significant drop in gross receipts by at least 20% from the same quarter the year before.
Business Qualifications
Two ways exist for businesses to qualify for the ERC:
- Fully or partially suspended by a government order: A business that has been fully or partially suspended by a government order due to COVID-19 is eligible for the ERC.Businesses ordered to close, reduce capacity or comply with certain restrictions are eligible for ERC.
- Significant decline in Gross Receipts: An eligible business who has suffered a significant decrease in gross receipts as a result of COVID-19 may also be eligible for ERC.Significant decline in gross revenues is defined as at least a 50% decline in a quarterly in 2020, or at least a 20% decline in a quarterly in 2021 when compared with the same quarter the previous year.
Examples and Scenarios
These examples and scenarios illustrate the criteria for each:
A government order can suspend a person’s rights in full or part
- A restaurant that is forced to close due to a government order is eligible for the ERC.
- The ERC is available to gyms that are required to operate with a reduced capacity because of a COVID-19-related government order.
Significant decline in gross receipts:
- ERC may be available for a retailer that suffers a drop of 50% in sales caused by COVID-19.
- ERC eligibility is for a manufacturer who is not able to operate at maximum capacity due to disruptions in the supply chain.
> > Click Here to Find Out if You Are Eligible for ERC< <
Credit Amount
Employee Retention credit (ERC), a tax-credit that businesses can claim, is for wages paid to qualified employees during the COVID-19 epidemic.The amount of the credit is dependent on the business’s quarter and employees.
In 2020, the credit will be equal to half of all wages that employees are entitled to receive up to $10,000.This means that a business could receive a credit of up to $5,000 per employee for 2020.
The credit for the first three quarters of 2021 is 70% of the qualified wages paid by employees. This maximum amount per employee per quarter is $10,000.For the first 3 quarters in 2021, an employer could receive up to $7,000 per employee each quarter. That’s up $21,000 per worker for the whole year.
> > Click Here to Find Out if You Are Eligible for ERC< <
Claim the Credit
How to Claim ERC in Federal Employment Taxreturn
Businesses that wish to claim the Employee Retention credit (ERC), on their federal employment tax returns must use Form 941-X, Revised Employer’s Quarterly Tax Return, or Claim for Refund.This form can be submitted for any quarter where the business was entitled to the credit.
Options for Claiming the ERC in Advance
Businesses have three options to claim the ERC.
- Claim your credit in Advance: Businesses can take advantage of the credit by reducing deposits made quarterly for employment tax.Businesses must submit Form 7200 to the IRS, Advance Payments of Employer Taxes and Credits.
- Businesses can reduce their quarterly deposits for employment tax by the amount they anticipate receiving.To reduce the deposits, businesses need to file IRS Form 941 and include the amount of credit that they expect to receive.
- Businesses that already pay their employment taxes to the IRS can request a reimbursement of the credit. To do this, they must file Form 941X.
Calculating the Amount of the Credit and Avoiding Double-dipping with Other Relief Programs
The ERC is calculated as the product of the employee’s qualified wage multiplied by the applicable credit rates.The credit rates for 2020 are 50% and 70% in the first 3 quarters of 2021.
Businesses should be careful to avoid double-dipping with other relief programs.For example businesses cannot claim ERC for wages used to claim Paid Family and medical leave credit or the Work Opportunity Tax Credit.
Tips and Resources for Recordkeeping and Documentation
Businesses should keep detailed records of all qualified wages paid to employees during the ERC period.This will enable businesses to accurately determine the amount of credit that they are eligible for, and to back up their claim should it be audited. Employee Retention Credit Massachusetts
Here are some helpful tips on documenting your records and documents:
- Keep a copy of all payroll records, including W-2 forms and Form 941s.
- Keep track at all times of employee hours, including vacation, sick and holiday leave.
- Keep track of the wages you pay to your employees. This includes base wage, bonuses, and overtime pay.
- Keep track of government orders affecting your business.
The IRS provides many resources to assist businesses in claiming the ERC. They include fact sheets, videos, and FAQs.Businesses can contact the IRS by calling 1-800-829-1040.
> > Click Here to Find Out if You Are Eligible for ERC< <
Examples of Eligible Businesses
Businesses that are affected by COVID-19 can receive the Employee Retention (ERC).Here are some businesses that could be eligible for Employee Retention Credit.
- Restaurants are forced to close by government order
- Retail stores that saw a significant fall in sales
- Manufacturers unable to operate at full capacity due to supply chain disruptions
- Non-profit organizations who saw their donations decrease
- Hotels and other hospitality enterprises
- Travel and tourism businesses
- Entertainment and event businesses
- Personal care businesses
- Gyms & fitness studios
- Salons and spas
- Stores that sell non-essential merchandise
- Businesses that had to operate on a lower capacity
- Businesses that are forced to implement new safety protocols
- Businesses that experienced increased costs due to COVID-19
These examples are not the only ones that qualify. Any business that has been suspended in whole or part by an order of government or that has seen a decline in gross sales due to COVID-19 could also be eligible. Employee Retention Credit Massachusetts
Here are some examples of how companies have used the ERC in specific situations:
- An employee of a restaurant forced to close down by government order for a few months was able to continue to be paid through the ERC.
- A retail store that experienced a 50% decline in sales due to COVID-19 was able to use the ERC to offset its payroll costs.
- ERC was used by a manufacturer that could not operate at full capacity due to disruptions in the supply chain to keep employees employed and continue production of essential goods.
- A nonprofit organization whose donations declined due to COVID-19 used the ERC to retain its employees and continue providing essential services.
If you are a business owner and you are unsure whether or not you are eligible for the ERC, I encourage you to contact a tax professional.They can help determine your eligibility as well as claim the credit for you if you’re eligible.
> > Click Here to Find Out if You Are Eligible for ERC< <
Avoiding Scams
Risks of ERC Scams and Aggressive Marketing
Unfortunately, scammers try to take advantage businesses who qualify for the Employee Retention Credit.These scammers may use aggressive marketing tactics to try to convince businesses to sign up for their services, even if the business is not eligible for the ERC.
Red Flags and Warning Signs
Here are some warnings and red flags for identifying potential ERC fraudsters:
- The company promises to give you a full refund without reviewing any of your records.
- The fees are high, or they take a large percentage of the refund.
- The salespeople are aggressive and use high-pressure tactics. Employee Retention Credit Massachusetts
- They aren’t affiliated with an established tax professional association.
- Some companies will ask for personal or financial details upfront.
Reporting Suspicious Activities and Protecting Personal Information
If you are contacted by an ERC scammer, you should report the activity to the IRS.You can do this by calling 1-800-829-1040 or by visiting the IRS website.
It is important to safeguard your personal and financial data.You should not provide your personal information to anyone contacting you uninvited.If you’re not sure if a company is legit or not, you should check reviews online. You can also contact the IRS.
> > Click Here to Find Out if You Are Eligible for ERC< <
Conclusion
This article has discussed the Employee retention credit (ERC), which is a tax relief that allows eligible employers to keep their employees employed during the COVID-19 Pandemic.We have explained the eligibility requirements, the claiming process, and the potential scams related to the ERC.
Also, we have provided some resources and tips for documenting and keeping records.The ERC is a valuable benefit that can help employers reduce their employment tax liability, improve their cash flow, and support their workforce.We encourage eligible employers to claim this credit and, if necessary, seek professional help.
> > Click Here to Find Out if You Are Eligible for ERC< <
Frequently Asked Questions about Employee Retention Credits
Employee Retention Credit Massachusetts
What is ERC?
This is a tax credit that can be refunded to businesses who were affected by the COVID-19 Pandemic.
This credit is equal in value to 50% of wages qualified to be paid in 2020. It is also equal in value to 70% of wages qualified to be paid in the first 3 quarters of 2021.
Who can receive the ERC?
Eligible business for the ERC includes those who suffered a significant reduction in gross receipts due to government order caused by COVID-19.
What are qualified wages?
Qualified wages include wages, salaries, tips, and bonuses paid to employees.
Also, health insurance premiums that employers pay are considered wages.
How do I claim ERC?
The IRS allows businesses to claim ERCs if they file an amended Form 951, or Form 951,-X.The amended Form 941 X must be submitted within three years from the original date of Form 941.
Do I have to pay back the ERC?
No, the ERC is a refundable tax credit, which means that businesses do not need to repay it.
Can I claim ERC even if I have received a PPP Loan?
You can still claim an ERC even though you received a loan through the Paycheck Protection Programme (PPP).
Businesses cannot claim the ERC for wages that were also used to claim the PPP loan.
Can self-employed individuals claim ERC?
Self-employed individuals can apply for the ERC.
Schedule C forms can be claimed by individuals who are self-employed.
Can nonprofit organizations claim ERC?
Yes, non-profit organizations are eligible to apply for ERC.
Nonprofit organizations may claim the ERC by submitting Form 990-T.
Can companies that own a foreign affiliate claim ERCs?
You can claim ERC on wages paid to foreign subsidiaries.
That said, there are some additional requirements that must be met before they can claim it.
Are there mistakes that companies make in claiming ERCs?
When claiming your ERC; businesses must be aware of the following mistakes:
- Wrong calculation on credit
- Include all wages that qualify
- Failure to amend Form 941-X on time.