The government launched the Employee Retention Tax Credit (ERTC) as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help businesses manage the economic impacts of the COVID-19 pandemic. The main goal of this refundable payroll tax credit was to retain employees, but its benefits go beyond this goal.
Learn more about the main ERTC employee benefits and how the credit helps companies maintain a skilled workforce.
Keep Employees on the Payroll
During the worst periods of the COVID-19 pandemic, many businesses suffered financial hits. Some considered laying off employees just to stay afloat. The ERTC offered a solution that allowed businesses to keep employees on the payroll through the highs and lows of the pandemic.
When business owners knew a payroll tax credit was coming, they could better budget their payroll funds and afford to keep workers employed. They didn’t need to sacrifice a skilled workforce to make ends meet during the pandemic.
Reinvest Funds To Hire New Talent
For businesses that ended up laying off employees during the pandemic, ERTC employee benefits provide an opportunity to reinvest in new talent. Business owners can take the money they saved on their payroll taxes and fill positions open since the pandemic. Alternatively, they can add more employees, growing their workforce.
Many businesses are still dealing with understaffing, whether due to a lack of interest from potential employees or the inability to compete with higher-paying employers. However, using funds from the ERTC could allow these businesses to offer higher starting wages to new employees, drawing in better candidates.
Use Excess Cash To Keep Your Company Afloat
The COVID-19 pandemic presented challenges to virtually every business in the U.S. Certain industries, like manufacturing, entertainment, and dining, faced lockdown protocols that forced their businesses to shut down for extended periods. But even businesses and tax-exempt organizations outside these categories had to adjust to working from home, catering to a virtual customer base, and maintaining social distancing orders.
These hits placed a financial toll on many businesses, but the ERTC provided excess cash to help struggling companies stay afloat. Employers can gain back up to $26,000 on qualified wages and health insurance costs per employee, significantly boosting revenue and capital. With this increase, many businesses have been able to avoid laying off employees.
Meet an Increase in Demand After the Pandemic
As the COVID-19 pandemic fades into the rearview mirror, many businesses are adjusting to new increases in demand among their customer bases. Consumers are returning to their pre-pandemic activities in full force, and many employers still don’t have the capital or workforce to keep up with this demand. Some are laying off employees just to gain the revenue necessary to meet consumer demand.
However, the ERTC can help business owners bridge the gap between past capital and current demand. It can give them excess funds to purchase new products or increase their labor force as necessary until they begin gaining more revenue from the heightened demand and can roll that into their output.
In September, the IRS announced “an immediate moratorium through at least the end of the year on processing new claims for the pandemic-era relief program” as a result of increased fraud concerns.
IRS Commissioner Danny Werfel noted in the announcement, “The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in,” and urged that when it comes to claiming the credit, “businesses should seek out a trusted tax professional who actually understands the complex ERC rules.”
You may find that working with a tax professional on your ERTC application to be of service.
Need Help Claiming the ERTC?
The Employee Retention Tax Credit has helped numerous businesses across the U.S. maintain a skilled workforce and stay afloat through COVID-19 challenges. If you have yet to claim the Employee Retention Tax Credit, it’s not too late. You can claim this credit as an amendment to your 2020 tax return until April 15, 2024, and as an amendment to your 2021 tax return until April 15, 2025.
The tax attorneys at Dayes Law Firm can help you maximize your ERTC employee benefits. Contact us today at 866-567-4510 for your free consultation.