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What You Need to Know About the Employee Retention Tax Credit

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What You Need to Know About the Employee Retention Tax Credit

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In the aftermath of the COVID-19 outbreak, businesses across the country have been forced to close their doors indefinitely. This has resulted in smaller businesses taking financial hits as a result — and the economy, as a whole, has slowed down in the process. The Coronavirus CARES Act was passed in an attempt to stimulate the economy — and businesses can find extra help in the form of the Employee Retention Tax Credit (ERTC).

What is the Employee Retention Tax Credit?

The Employee Retention Tax Credit is a tax credit designed to help businesses keep employees on their payroll. This is available to all employers regardless of the size of their business, including tax-exempt organizations.

Does my business qualify for the ERTC?

For an employer to qualify for the ERTC, they have to fall into one of the following categories:

  1. Your business should have been fully or partially suspended by the government as a result of COVID-19 during the calendar year.
  2. Your gross receipts are below 50% from a comparable quarter in 2019. Once your gross receipts exceed 80% of a comparable quarter in 2019, they will no longer qualify after the end of that quarter.

What is the amount of the credit?

The credit will amount to 50% of qualifying wages, up to $10,000 in total. Wages paid after March 12, 2020 and January 1, 2021 are eligible for the credit.

Which wages qualify?

If your business has less than 100 employees, the credit is based on wages paid to all employees, regardless of whether or not they worked, as long as they were full-time employees paid for full-time work.

If your business has more than 100 employees, the credit is only allowed for wages paid to employees who didn’t work during the calendar quarter.

How do I receive the credit?

You can request an advance of the ERTC by submitting Form 7200.

You can also be immediately reimbursed for the credit by reducing the required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

The ERTC was created to help businesses who need aid in recovering from the effects of the Coronavirus outbreak. You can find more information or direct help on the official IRS website.

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Tickmark, Inc. and its affiliates do not provide legal, tax or accounting advice. The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations. All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction. The content on this website is provided “as is;” no representations are made that the content is error-free.

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published

April 7, 2020

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Ralph Carnicer, CPA

Ralph Carnicer, CPA

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