Running a small business can be a challenge, especially given the many changes that have passed over the country in the past few years. Of all the opportunities made available to US businesses in the wake of the COVID-19 pandemic, the employee retention credit is among the most lucrative.
However, many business owners are unclear about whether or not they are actually eligible for this program. It can be beneficial to read through an employee retention credit FAQ if you’re curious about applying for this stimulus program yourself.
What do you need to know about the ERC? Read on, and we’ll walk you through the basics.
What Is the ERC?
When the federal government passed COVID economic relief legislation under CARES, the employee retention credit was part of the legislation that was passed. The power of the ERC is right there in the name – it’s a credit intended to incentivize business owners to keep their employees on during this difficult time. The reward for keeping employees on was a significant saving on tax payments.
How did it work? 50% of the wages that an employer-paid to an employee during each quarter could be deducted from the business’ overall tax burden.
Employers were able to claim up to $5,000 per employee – a total that could really add up. That number rose even further in 2021, allowing business owners to deduct up to $7,000 per claim per quarter for that calendar year.
Who Qualifies for the ERC Tax Credit?
Not all businesses will be eligible for the ERC tax credit. Only those who experienced some disruption due to the COVID-19 pandemic could apply for this credit.
What sort of disruptions could count? Reduced service due to supply chain issues, capacity limitations, and reduced hours of operation all would count.
A full shutdown of a business due to government orders at the local level would also make a business eligible. Alternatively, if a business saw a significant decline in their gross profits (50%) compared with the similar 2019 quarter, they could then apply.
Is It Too Late to Apply?
Even though the calendar years that the ERC applies to have passed, it’s still not too late to apply for this huge stimulus program. As long as you’ve kept your records properly, you can apply for a tax credit for wages paid between March 2020 and September 2021.
You have a three-year window from the original tax return year to file an amendment and receive this tax discount.
You can read more about applying retroactively at https://erctoday.com/
Employee Retention Credit FAQ
If you’re looking to learn more about the business of applying for the ERC, the above information can help answer some of your most basic queries.
The above employee retention credit FAQ should provide all the basic information you need about this kind of stimulus support.
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