The COVID-19 virus has wreaked havoc across all businesses, forcing some to shut their doors or layoff employees.But there is a lifeline available to help businesses stay afloat: the Employee Retention Credit (ERC).
The ERC is a refundable tax credit that businesses can claim on qualified wages paid to employees during the pandemic.It is designed to help businesses keep their employees on payroll, even if they are unable to operate normally.
If you own a small business and have been affected by the pandemic then the ERC will help you to keep your staff on board, as well as your business going.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 CreditHas Anyone Received Employee Retention Credit Refund
Employee Retention (ERC) Credit is a refundable credit that businesses may claim on wages paid during the COVID-19 pandemic.It was established by the Coronavirus Aid, Relief, and Economic Security Act in March 2020 in order to help businesses retain their employees, even if it meant they could not operate normally.
ERCs are available to all businesses, even tax-exempt ones.To be eligible for the ERC, a company must have had a significant fall in gross receipts and/or have been fully or partial suspended as a result of an COVID-19 government order.
Businesses that have been affected by this pandemic can receive a substantial financial boost from the ERC.It can assist businesses in retaining their employees, covering payroll costs, as well as investing in their future.
Why was ERC formed?
The COVID-19 pandemic triggered a severe economic recession, forcing many companies to layoff their employees or close down.The ERC aims to help companies keep their staff on the payroll in order to quickly reopen after the pandemic is over.
ERC Benefits
ERC can be a major financial boost for businesses who have been affected by the pandemic.It can also help businesses retain their employees, which is essential for a quick recovery.
The ERC can be claimed by businesses even if no taxes are due.Businesses can also claim the ERC for qualified wages paid to employees who are not working due to COVID-19, such as employees who are furloughed or quarantined. Has Anyone Received Employee Retention Credit Refund
Impact of the ERC on Businesses and the Economy
The ERC helped keep millions of Americans in employment during the COVID-19 Pandemic.It also helped businesses weather the storm and stay afloat.
ERC may have prevented the closure of hundreds of thousands of businesses and saved over 10,000,000 jobs.It has also contributed towards the economic recovery through a boost in consumer spending and investment.
> > Click Here to Find Out if You Are Eligible for ERC< <
Eligibility
The main difference between the 2020 and 2021 ERC requirements is the gross receipts decline test.In order to qualify for the 2020 ERC, businesses must have had a substantial decline in gross revenues of at least half compared with the same quarter last year.In 2021 a business will have to experience a significant decrease in gross revenues of at least 20 percent compared with the same quarter last year.
Business Qualifications
Business can qualify in two ways for the ERC
- ERC for a business suspended fully or partly by a Government Order: An ERC can be awarded to a business that is suspended either completely or partially by an order of the government due COVID-19.This includes businesses that have been ordered to close, operate at a reduced capacity, or follow certain restrictions.
- Significant decline of gross receipts. A business which has seen a significant fall in its gross receipts because of COVID-19, is also eligible to receive the ERC.Significant decline in Gross Receipts: A business that has experienced a significant decline in its gross receipts due to COVID-19 is also eligible for the ERC.
Examples and Scenarios
You can use the following examples to demonstrate each eligibility criterion.
Full or partial suspension by government order
- ERC can be claimed by a restaurant forced to shut down due to an order from the government.
- ERC can be awarded to a fitness center that has to operate on a reduced basis due to an order from the government based on COVID-19.
Significant decline in gross receipts:
- ERC can be awarded to a retail store that has experienced a 50% decrease in sales because of COVID-19.
- ERC is available to manufacturers who are unable to run at full capacity because of supply chain disruptions.
> > Click Here to Find Out if You Are Eligible for ERC< <
Credit Amount
Employee Retention (ERC) Credit is an income tax credit which businesses can claim in relation to wages that were paid during the COVID-19 Pandemic.The amount of the credit varies depending on the quarter and the number of employees a business has.
Credits for 2020 are equal to 50% the qualified wages paid by employees, up to a maximum amount of $10,000 per employee.This could mean that an employer can get a credit up to $5,000 for 2020.
For the first three quarters of 2021, the credit is equal to 70% of qualified wages paid to employees, up to a maximum of $10,000 per quarter per employee.This means a company could receive a credit for up to $7,000 for each employee per quarter in the first three months of 2021. The total for the entire year is up to $21,000.
> > Click Here to Find Out if You Are Eligible for ERC< <
Claim the Credit
How to Claim ERC in Federal Employment Taxreturn
For businesses to claim Employee Retention Credit on federal employment taxes, they must amend Form 941X – Adjusted Employer’s quarterly Federal Tax Return (or Claim for refund) – in order to do so, they will need to file Form 941X.This form can also be filed for any other quarters in which a business may have been eligible for credit.
Options for Claiming the ERC in Advance
Businesses have three choices for claiming ERCs:
- Claim credit in advance. Businesses can claim credit in advance by reducing their quarterly deposits for employment tax.To do this, businesses must file Form 7200, Advance Payment of Employer Credits and Taxes, with the IRS.
- Businesses may also reduce their quarterly tax deposits on employment by the credit amount they expect.Businesses can do this by filing Form 941 and indicating how much they will reduce their quarterly employment tax deposits.
- Businesses can ask for a refund if they have already paid the employment tax. They should file Form 941-X at the IRS.
Calculating the Amount of the Credit and Avoiding Double-dipping with Other Relief Programs
Multiplying employee wages with the applicable credit rate will give you the ERC.The credit rates for 2020 are 50% and 70% in the first 3 quarters of 2021.
Businesses must be cautious to not double dip with other relief programmes.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 Documenation
Keep detailed records for all wages that were paid to employees in 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. Has Anyone Received Employee Retention Credit Refund
Here are some tips on recordkeeping and documentation.
- All payroll records should be kept, including W-2s and Forms 941s.
- Keep track of all hours worked by employees, including vacation, sick, and holiday time.
- Keep track of all wages paid to employees, including base wages, bonuses, and overtime pay.
- Keep track of any government orders that affected the business’s operations.
The IRS provides a variety of resources to help businesses claim the ERC, including FAQs, fact sheets, and videos.Businesses can also contact the IRS for assistance by calling 1-800-829-1040.
> > Click Here to Find Out if You Are Eligible for ERC< <
Examples of Eligible Businesses
Businesses impacted by COVID-19 are eligible for the Employee retention credit (ERC).Here are some businesses that could be eligible for Employee Retention Credit.
- Restaurants are forced to close by government order
- Retail stores that experienced a significant decline in sales
- Disruptions in the supply chains prevent manufacturers from working at full capacity
- Non-profit organizations who saw their donations decrease
- Hotels and other hospitality business
- Travel and tourism companies
- Entertainment and event businesses
- Personal care businesses
- Fitness studios and gyms
- Salons and spas
- Retail stores selling non-essential goods
- Businesses that had to operate on a lower capacity
- Businesses that were forced to implement new safety measures and protocols
- Costs incurred by businesses as a result of COVID-19
ERCs may be awarded to any business, including those that were fully or partially closed by a government order and/or experienced a significant decrease in gross receipts because of COVID-19. Has Anyone Received Employee Retention Credit Refund
Here are some specific examples of how businesses have used the ERC:
- A restaurant that had to close its doors for several weeks due to government orders was able, with the ERC, to keep all of its employees employed.
- An ERC offset the payroll costs of a retail shop that saw a 50% decrease in sales because of COVID-19.
- ERC allows a company to maintain its workforce and produce essential products despite being unable to run at full capacity.
- An organization that had seen its donations drop due to COVID-19 could use the ERC in order to keep their employees on the payroll and continue to offer essential services.
If you are an owner of a business and are unsure as to whether you are eligible for ERC, then I would encourage you contact a tax specialist.You can get help from a tax professional to determine your eligibility for the ERC and claim it if eligible.
> > Click Here to Find Out if You Are Eligible for ERC< <
Avoiding Scams
Risks of ERC Scams and Aggressive Marketing
Unfortunately, some scammers take advantage of companies that qualify for the Employee Retention Credit.These scammers use aggressive marketing to convince businesses to subscribe to their services even if that business isn’t eligible for the Employee Retention Credit (ERC).
Red Flags and Warning Signs
Here are some warning signs and red flags to identify potential ERC scammers:
- They promise you will get a refund even if they don’t review your records.
- You will be charged high fees upfront, or a percentage of your refund.
- Sales tactics are high-pressure. Has Anyone Received Employee Retention Credit Refund
- They aren’t affiliated with an established tax professional association.
- Some companies will ask for personal or financial details upfront.
Reporting Suspicious Actors and Protecting Your Personal Information
If you are contacted by an ERC scammer, you should report the activity to the IRS.You can call 1-800-829-1040 for more information or go to the IRS web site.
You should also be careful to protect your personal and financial information.Do not give your personal information to anyone who contacts you unsolicited.If you want to know if a particular business is legit, check online reviews. Or contact the IRS.
> > Click Here to Find Out if You Are Eligible for ERC< <
Conclusion
We have covered the Employees Retention (ERC) Credit in this article. This is a tax credit program that helps employers who qualify to retain their staff during the COVID-19 pandemic.We have explained the eligibility requirements, the claiming process, and the potential scams related to the ERC.
We have also provided tips and resources on recordkeeping and documentation.The ERC is a valuable benefit that can help employers reduce their employment tax liability, improve their cash flow, and support their workforce.If you qualify as an employer, please claim the ERC and get professional assistance if you require it.
> > Click Here to Find Out if You Are Eligible for ERC< <
Employee Retention Bonus Frequently Answered Questions
Has Anyone Received Employee Retention Credit Refund
What is ERC?
The COVID-19 pandemic has impacted businesses. A refundable tax credit is available.
This credit is equal 50% of qualified wage paid to employees for 2020 and 70% qualified wage paid to employees during the first three-quarters of 2021.
Who can receive the ERC?
Eligible businesses include those who have seen a significant decrease in gross revenues or have been suspended fully or partly due to government orders resulting from the COVID-19 Pandemic.
What is a qualified wage?
Salary, wages, bonuses, and tips are all considered to be wages.
The employer’s health insurance premiums are also included in the calculation of wages.
How can I claim my ERC?
Businesses can claim ERCs by filing amended Forms 941 or 941-X at the IRS.The amended form 941-X is required to be filed within 3 years from the date that the original Form 941 has been filed.
Do I need to repay the ERC?
The ERC is not a tax credit that needs to be repaid.
Can I claim ERC if I received a loan from PPP?
Yes, businesses can claim the ERC even if they received a PPP loan (Paycheck Protection Program).
The ERC cannot be claimed for wages used to obtain a PPP loan.
Can self-employed individuals claim ERC?
Yes, the ERC is available to self-employed people.
Self-employed individuals can claim the ERC on their Schedule C form.
Can non-profit organizations claim ERC?
Yes, organizations that are not for profit can qualify for the ERC.
Nonprofit organizations can claim the ERC on their Form 990-T form.
Can companies that own a foreign affiliate claim ERCs?
Yes, businesses can claim the ERC for wages paid to employees of foreign subsidiaries.
However, they must also meet certain additional requirements before they are eligible to claim the benefits.
Are there common mistakes that businesses make when claiming ERC to watch out for?
The following are some common mistakes to avoid by businesses when claiming the ERC:
- Credit calculation error
- Include all wages that qualify
- Failing to amend Forms 941-X within the specified timeframe.