In Congress’ ongoing attempt to help businesses recover from the pandemic’s economic impact, the 2020 Cares Act created the Employee Retention Credit (ERC). Through further legislation in 2021, Congress extended the ERC to include the third quarter of 2021 and the qualification standards were relaxed considerably. It is possible that your business could qualify for the Employee Retention Credit on your previous 941 employee wage filings, resulting in thousands of dollars back in your pocket.
Our team at Pittman Legal & Tax Advisors have kept abreast of the changes to this complicated tax credit, and we can collect the data from you to determine your qualification.
Does Your Business Qualify for the Employee Retention Credit?
Was your business forced to close, fully or partially, at any point due to government mandates? OR Did your business experience a drop in revenues in 2020 or 2021? If you can answer yes to either question, then an evaluation of your financials including Qualified Wages will allow us to determine if you qualify for the ERC. The definition of Qualified Wages varies depending on the number of employees, the specific quarter we are reviewing, the ownership of the company and the relationship of the employee to the majority owners.
An eligible employer’s ability to claim the ERC is impacted by other credit and relief provisions as well:
- If an employer receives a Small Business Interruption Loan under the Paycheck Protection Program (PPP), then the wages used to qualify for the PPP loan are not eligible for the Employee Retention Credit. However, any wages outside the PPP loan period could be Qualified Wages.
- Wages for this credit do not include those for which the employer received a tax credit for paid sick and family leave or if the employer is allowed a Work Opportunity Tax Credit.
Claiming the Credit:
To claim the ERC, eligible employers must report their total qualified wages and the related health insurance costs for qualifying quarters through their employer tax returns, typically form 941. The credit is taken against the employer’s share of Social Security tax, and the excess is refundable under normal procedures.
Please reach out to us for more information on whether your business can qualify for the employee retention credit. You can email me at firstname.lastname@example.org or Shawn at email@example.com and we will review your specific situation.