Can You Claim the ERTC for Wages to Interns or Apprentices?
Did your business close down or have a big drop in gross receipts during the COVID-19 pandemic? If so, you might be eligible for the Employee Retention Tax Credit (ERTC). Eligible employers can claim a credit that’s potentially worth thousands for each employee kept on payroll throughout the pandemic.
Businesses and tax-exempt organizations may wonder whether they can claim the credit for interns or apprentices. Here’s what to know about ERTC employee qualifications and claiming the Employee Retention Credit.
The ERTC Explained
The ERTC is a refundable credit that reimburses you for keeping employees on payroll in 2020 and 2021. If you qualify, you could claim:
- Up to $5,000 per employee for 2020
- Up to $7,000 per employee per quarter for 2021
The catch is that you can only claim wages paid to eligible (full-time) employees. The IRS defines a “full-time employee” as anyone who works at least 30 hours per week or 130 hours per month.
Whether you can claim wages depends on whether the IRS considers you a small or large employer. For 2020, if you had fewer than 100 full-time employees, you can claim all wages paid whether an employee was working for you or not. If you had more than 100 employees, you can only claim wages paid to employees who were not working for you.
The criteria for 2021 are nearly the same, except the IRS raised the employee limit to 500.
Do Interns or Apprentices Count as Employees for the ERTC?
Do ERTC employee qualifications include apprentices and interns? As long as you paid wages to them and they worked at least 30 hours per week (or 130 hours per month), you can claim the credit for wages paid to interns and apprentices.
One important thing to note is that you can’t claim the credit for wages paid with a PPP (Paycheck Protection Program) loan. If you qualified for a PPP loan and used that to pay your interns or apprentices, the IRS will not credit you for those wages with the ERTC.
It can be tricky to claim the credit for interns and apprentices because many don’t work full-time hours. If your intern or apprentice worked less than 30 hours weekly, you cannot claim a credit for them.
Does Your Business Qualify for the Credit?
Your business must also meet one of two following criteria to qualify for the credit:
- You had a significant decline in gross receipts (at least 50% compared to the same quarter of the prior year for 2020, or at least a 20% drop in 2021).
- You had a full or partial suspension of business operations.
The gross receipts test is fairly self-explanatory, but what about the second requirement? Examples of suspending business operations include:
- You had to close your dining room
- You had to close early because of a citywide curfew
- You couldn’t hold group meetings or travel for business
- One of your vendors closed down, which impacted your business
Claiming the ERTC
To claim the ERTC for your business, you can report qualified wages paid on Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. You’ll need to provide information such as how much in wages you paid to interns, apprentices, and full-time employees, as well as how many hours those employees worked.
Contact Dayes Law Firm for Help With Claiming Your Credit
ERTC employee qualifications can be tricky to understand, but Dayes Law Firm is here with valuable guidance for employers who want to claim the credit. If you’re unsure whether wages paid to interns or apprentices qualify for the credit, reach out to us at 866-567-4510 today.