Have you applied for the Employee Retention Tax Credit (ERTC) yet? This tax credit under the Coronavirus Aid, Relief, and Economic Security (CARES) Act gives eligible employers up to $10,000 in tax credits per employee on their 2020 payroll taxes and up to $21,000 per employee for 2021. However, it has a few intricacies that have intimidated some business owners.
If you don’t feel confident applying for the ERTC, consider enlisting an accountant to help. Learn a few ways accountants can assist with the ERTC below.
Help You Calculate Gross Receipts
You may qualify for the ERTC if you experienced a significant decline in gross receipts in 2020 or 2021 compared to the same quarter in 2019 (or if you were a startup in 2020, under the Recovery Startup Businesses extensions). A significant decline would be 50% less than the comparable quarter in 2020 or 20% less than the comparable quarter in 2021. “Gross receipts” refer to virtually any income or revenue your business made.
Your accountant can gather your receipts over these two years and compare them to those from 2019 to ensure you are eligible for employee retention credits.
Determine Qualified Wages To Claim
You’ll also need to stick to precise rules when calculating the qualified wages to claim through the ERTC. The first is determining whether your business is small or large under the ERTC.
Small businesses had 100 or fewer employees in 2020 or 500 or fewer in 2021. Large businesses exceeded these figures.
If your company was a small business in 2020, you may be able to claim up to $10,000 in qualified wages per full-time employee. For the 2021 tax year, you could claim up to $21,000.
Meanwhile, if your company was a large business in 2020 and/or 2021, you could claim the wages you paid to employees who were not providing services because of COVID-19 shutdowns.
Accurately calculating your qualified wages is important for claiming the ERTC without issue. Accountants who help with the ERTC can handle these calculations to prevent delays to your tax credits.
Help You Meet the ERTC Filing Deadlines
You’ve likely already filed your 2020 and 2021 tax returns. If you didn’t claim the ERTC on those returns, you can file amendments with the new information and your application for the tax credit. You’ll just need to file the amendments for 2020 by April 15, 2024, and for 2021 by April 15, 2025.
These deadlines may seem far away, but you don’t want to miss them by delaying the application process too far. You also probably want to acquire your tax credit money as soon as possible. An accountant can handle the filing process and ensure you stay within the deadlines.
Explain Aggregation Rules
If you have a business with multiple branches, you may need to classify them as a single business under the ERTC’s aggregation rules. As a result, you’d need to add up all your gross receipts for each branch, determine whether your business is small or large based on the number of total employees within the controlled group, and calculate wages accordingly.
Failing to follow aggregation rules could lead you to claim too much on your ERTC application, requiring you to pay back a portion of the credit down the line. Your accountant can help determine whether your businesses count as a controlled group under the aggregation rules.
Seek ERTC Assistance Today
Looking for accountants to help with the ERTC? Our tax professionals at Dayes Law Firm can assist you. Call 866-567-4510 for more information.