With so many businesses affected by the pandemic in 2020, the United States government stepped in to help. One way they helped was by introducing the Employee Retention Credit or the ERC. This tax credit can be a bit confusing especially if you are not a CPA.
We wrote the guide below to share the ins and outs of the ERC, so that you can understand everything there is to know about this tax credit.
What Is the ERC?
The ERC is a refundable tax credit that allows your business to claim against payroll taxes. If your business is eligible, you can claim up to 70% of the qualified wages that you pay to your employees. The maximum amount your business can claim per quarter is $10,000 per employee.
This equates to receiving up to $7,000 per employee per quarter. You can learn a bit more from erctoday.com, or similar sites, and keep up with the latest rules and deadlines for the credit. There are plenty of small businesses that don’t realize that they can file for the ERC in 2022.
How to Be Eligible for the ERC?
Employers are eligible for the ERC if they had to suspend their operations either 100% or part-time because of government orders due to COVID-19. A business is also eligible if they have seen a major decline in its gross receipts. This decline has to be 50% or higher in comparison to the same quarter in the previous year.
The ERC can be claimed for eligible wages that were paid between March 13, 2020, through December 31, 2021. You can’t claim the ERC credit if you claimed those same wages for funds paid out via the Paycheck Protection Program. You can only claim wages that were not used for any other tax credits.
How Will the ERC Help Your Business?
You can offset a portion of your payroll taxes which is going to allow you to keep more cash to support other business operations. This can really give your business a huge financial relief and lift some stress and weight off your shoulders. You can also prevent layoffs because you will have the extra cash on hand.