Employee Retention Tax Credit
The COVID-19 Pandemic wreaked havoc on lives and businesses around the world. The shutdowns and uncertainty hit small business owners hard, and many are still trying to recover.
The Employee Tax Credit was created as a tax relief to assist and reward small businesses that kept employees on payroll in 2020 and 2021, despite suffering losses or disruptions caused by COVID-19 related shut downs.
Wondering if your business might qualify? Read on to learn more.
What is the Employee Retention Tax Credit?
The Employee Retention Tax Credit, also known as ERC or ERTC, is a refundable tax credit. It was introduced in the early days of the COVID-19 pandemic as a way to incentivize smaller businesses to keep paying their employees on payroll, even when businesses saw their bottom line drop or their workers couldn’t actually come into work.
Despite being one of the first financial relief programs available, the Employee Retention Tax Credit was overshadowed by the Payment Protection Program, or PPP Loans, and many qualifying business owners didn’t take advantage of the ERC because they simply didn’t know about it.
Now ERC can still retroactively provide financial relief to qualifying businesses affected by COVID-19 disruptions and receive up to $26,000 per employee. If your small business paid employees on payroll through 2020 and/or 2021, despite suffering losses, then you can still qualify to receive funds.
How does the ERC work?
The ERC is a refundable payroll tax credit for qualifying employee wages. The amount awarded is based on payroll taxes paid by an employer, including an employer’s share of social security taxes.
As a tax credit, it means money subtracted from your owed taxes. But the Employee Retention Tax Credit is refundable! This means you can get a tax refund larger than the amount of tax paid throughout the year.
Let’s say you qualify to receive $45,000 from the ERC, but your business only paid out $10,000 in payroll taxes for qualifying wages during 2020-2021. You not only get the $10,000 taken off your taxes, you also receive the additional $35,000 paid directly to you!
How do you qualify for the ERC?
The ERC was mainly designed with small business in mind. You can reach our team here to see if you qualify and how to receive the funds in as little as 10 days.
Eligibility is determined by several factors:
Number of Employees On Payroll
In order to qualify for the Employee Retention Tax Credit you just have to have had fewer than 100 employees in 2020 and/or the first three quarters of 2021 and have paid them on payroll.
Business Negatively Affected by COVID-19
Since the ERC was designed as a relief, you have to show how your business was negatively impacted by the COVID-19 Pandemic in one of two ways:
- You were forced to partially or totally shut down operations due to government mandates.
- The business suffered losses greater than 50% relative to the same time period in 2019.
Recovery Startup Businesses
In 2021 the American Rescue Plan amended the ERC to include newer businesses considered a “recovery startup business”. Newer businesses can apply for credit for the second half of 2021, including Q4, if they meet the following criteria:
- Opened doors on or after February 15, 2020.
- Have annual gross receipts under $1 million.
- Have one or more W2 employees.
ERC and PPP
Even if you received Payment Protection Program loan forgiveness, you can still be eligible for an ERC refund! You just can’t double dip using the same payroll, meaning any wages declared on a PPP forgiveness application can’t be used for an ERC.
Avoiding Scams
The amount of available funds for the ERC has also meant an increase in scams. So much so that the IRS has begun issuing statements warning against fraudulent marketers duping business owners into applying, whether they qualified or not, in order to receive handsome commission fees.
At ACG, we don’t collect any upfront fees or hourly billing – our fees are based on the sum you receive.
Our team is made up of experienced people, and we are proud to have verifiable testimonials and case studies of how we’ve helped numerous small business owners –such as yourself– take advantage of the ERC and finally ease some of the struggle caused by the COVID-19 pandemic.
How To Apply for the ERC
While the availability of the ERC is a welcome assistance for small business owners, the application process can be daunting. The filing procedure and necessary forms for retroactively amending your tax returns are different depending on when the qualifying forms were paid, and applying without first verifying your eligibility can lead to penalty fees.
Archetype Consulting Group is dedicated to making this process simple and efficient.
Contact us today to see how our experienced team of professionals can maximize your ERC credit in just a few simple steps:
- A consultation call to talk through whether or not you qualify.
- Working with your CPA, payroll company, and/or accountant to collect all necessary documents.
- Filing the paperwork on your behalf and providing you with an audit-ready packet with all the necessary documentation.
Surviving the COVID-19 Pandemic was an incredible challenge for small business owners. Thankfully, getting your tax relief doesn’t have to be. Give us a call today, and let’s get you the funds you’re entitled to!
