The pandemic paused plans for growth for many businesses, but as the pandemic wanes, now is an excellent time to consider adding a few new employees to your roster.
Savvy business owners take advantage of every opportunity available to them when it comes to growth and hiring. If your business kept workers on payroll in 2020 or 2021, you could qualify for the Employee Retention Tax Credit (ERTC), which gives you money that you can use to expand. Below, find ERTC hiring advice and learn how this valuable credit could help grow your business.
What Is the ERTC?
The ERTC, also called the Employee Retention Credit (ERC), is a refundable tax credit for business owners who continued paying employees throughout the pandemic. The U.S. government introduced the ERTC as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020.
The ERTC program expired in 2021, but qualifying businesses can still claim the credit retroactively via an amended tax return.
How the ERTC Benefits Growing Businesses
The ERTC gives you cash that your business can use for nearly any expense, including:
- Hiring new workers
- Training employees
- Advertising
- Buying new equipment
- Paying bills
If you qualify, your business can claim a credit worth:
- Up to $5,000 per employee for 2020
- Up to $7,000 per employee per quarter for 2021
Some businesses use the credit to build their benefits program, making it more attractive to potential hires. Perks like free child care, fitness memberships, and extra paid vacations may be just what you need to attract and retain staff.
Other businesses use the money to invest in real estate, such as new office space. If your business is thriving, this could be a great chance to open a few new locations in different cities.
If you plan to use the credit to attract new employees, set aside ERTC hiring funds as soon as the IRS sends the money to you.
Does Your Business Qualify?
Requirements to claim the credit are rather strict, and not all businesses can meet them. To be eligible, your business must have either:
- Shut down either partially or fully because of a government order
- Experienced a big decline in gross receipts
What does the IRS mean by a “big decline” in gross receipts? For 2020, your receipts must have dropped by at least 50% compared to the same calendar quarter of the previous year. For 2021, you’ll need a decline of at least 20%.
It’s important to know that you may not be able to claim the ERTC for all employees. You can only claim it for qualified wages, including health care costs, paid to full-time employees.
For 2020, if you had less than 100 full-time employees, you may claim the credit for all of them. If you had more than that, you can only claim the credit for employees you paid but who weren’t providing services to your business. The employee requirement increases to 500 for 2021.
Claiming the Credit
To claim the ERTC, you must report qualified wages paid on Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. You must submit this form by mail, as the IRS doesn’t allow online filing at this time. Expect to have your credit in about six to eight weeks.
Reach Out If You Need Help Claiming the ERTC
ERTC hiring funds can give growing businesses a serious advantage, so if you qualify, it’s wise to claim your credit as soon as possible. If you have questions about claiming the ERTC, give Dayes Law Firm a call at 866-567-4510.