As a small business owner, it’s essential to be aware of the various taxes associated with running a business, but let’s be honest—taxes are boring. The most enjoyable part of filing taxes is getting your reimbursement for overpayment. Knowing whether or not your company is eligible for a tax refund can save you money and help ensure that you’re fully compliant with all IRS regulations.
In this blog post, we’ll be looking at one of the best tax refunds for small businesses, answering the question: what is the Employee Retention Credit, so you understand how it works.
What Is The Employee Retention Credit (ERC)?
The Employee Retention Credit is supplied through federal aid like the Small Business Healthcare Tax Credit. It reimburses businesses with up to 70% of the qualified wages paid to employees during specific periods of the COVID-19 pandemic or with other particular circumstances. Whether you had to shut down or just encountered major declines, this credit is a lifeline that can help reward you for keeping your employees on payroll during that tough time.
Which businesses can qualify for the Employee Retention Credit?
Many businesses can qualify for the credit. For the 2021 tax year, these include business:
- With less than 500 employees and operations were prevented or suspended due to a government mandate, either in hours or service capacity.
- Or, with less than 500 employees and revenue was less than 50% OF 2019 gross receipts.
Relatively new businesses can also qualify if:
- They were established after February 15, 2020
- Have annual gross receipts under $1 million and,
- Have one or more W2 Employees
How Do I Apply for Employee Retention Credit?
If your wondering—what is the Employee Retention Credit and how to apply, the process involves filing Form 941-X. This is the Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, with their federal tax return. Filing this form on time is essential to qualify. However, the ERC filing process can be complex.
Luckily, companies like RefundsPro are here to guide you through this process with ease and confidence. They specialize in assisting small and medium-sized businesses with their filings. If you had employees during 2021, you probably qualify for a covid-related tax credit worth up to $28k per employee.
In just 5 minutes, you can see if you qualify through their quick questionnaire and be well on your way to claiming this beneficial refund.
When Is The Deadline To Apply For The Employee Retention Credit?
Unfortunately, if you’re hoping to file for 2020, the deadline has already passed. The filing deadline for 2021 is April 15, 2025. Keep in mind that this process takes time. Experts suggest that to ensure you meet the deadline, that you file by February 15, 2025.
How Much Is The Employee Retention Credit?
According to the Treasury Department, businesses can be credited up to $7,000 per employee per quarter, for 2021. Therefore, the maximum tax credit available to an employer is $28,000 per employee. It’s important to keep in mind that for tax years 2024 and beyond, the Employee Retention Credit is not available, so be sure to retroactively apply for 2021.
How Can I Spend The Employee Retention Credit?
While you can’t blow it on any frivolous expenses, it is a fully refundable tax credit. That means you’re looking at a potential reimbursement of up to 70% of up to $10,000 in wages per employee per quarter of 2021. If you struggled during the pandemic, or are simply looking for ways to save, this credit might just be the lifeline your business needs.
Does The Employee Retention Credit Have To Be Paid Back?
No! The ERC is like a big pat on the back from the government, thanking you for your resilience and determination. Instead of a loan, the ERTC is extra reimbursement in the form of employer credits. It’s like hitting the jackpot, but instead of gambling, you were just doing what you do best.
If I Received a PPP Loan, Can I Still File For The Employee Retention Credit?
Thanks to the Consolidated Appropriations Act (CAA), small businesses that received a PPP loan can still apply for the Employee Retention Credit. However, payroll expenses can’t be claimed as both an ERC wage and a forgivable cost on the PPP loan forgiveness application.
Conclusion
As a small business owner, it can be a bit overwhelming to understand all of the nuances when it comes to taxes. But the good news is that you can take steps to maximize your tax savings.
The Employee Retention Credit is one of the best tax refunds for small businesses and it’s worth exploring if you think you may qualify. We hope this blog post has given you a better understanding of how the ERC works, so that you have the opportunity to get back as much money as possible – and feel reassured knowing you are compliant with IRS regulations. For more information about tax-savings and tips to protect your business check out Group Health Quotes! At Group-Health-Quotes.com we have an extensive resource library with tons of valuable articles and blogs. And, if you’re thinking about taking the next step to protect your team, we offer free group health insurance quotes, side-by-side plan comparison tools and expert help to answer any questions you may have. To get started, just enter your ZIP code in the box above, or call us at 888-571-0291.
