When you’re a business owner, you have to learn how to adapt. However, when the COVID-19 pandemic reached its height in 2020 and 2021, even the most savvy business owners found themselves at a loss.
To compensate for some of the financial distress businesses suffered, Congress introduced the employee retention tax credit (ERTC), which you might have also heard called the Employee Retention Credit (ERC).
Now that many businesses are back on their feet, what is the ERTC’s impact?
What Is the ERTC?
The government introduced the ERTC through the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020. The employee retention tax credit allowed employers to claim a portion of employee wages they paid as a refund in order to help them keep employees on their payroll and prevent unemployment.
In its early stages, the ERTC had strict eligibility requirements. However, in 2021, the Consolidated Appropriations Act expanded the qualifications to include more businesses. It also extended the ERTC through 2021.
To qualify for the credit, you must prove your business saw a 50% revenue decline in 2020, and 20% in 2021. Alternatively, you may qualify if you had to shut down business operations fully or partially due to a government order.
Later, the Infrastructure Investment and Jobs Act ended the ERTC for most businesses by specifying they could only claim the credit for the first three quarters of 2021.
COVID-19’s Impact on the Bottom Lines
When the COVID-19 pandemic hit, businesses’ bottom lines suffered in unprecedented ways. Many businesses lost employees, whether that be because they could no longer afford to pay them or because employees had to quit for their own safety.
For any non-essential businesses, especially brick-and-mortar stores, sales dropped. There was exponentially less foot traffic as people left their homes less and less. Many businesses had to reduce hours as well, which only limited sales more. Many had to shut down altogether for periods of time due to government orders to reduce the spread of COVID-19.
All of these factors likely meant your bottom line took a hit and you lost revenue in 2020 and 2021. The good news? You can recover some lost revenue with the ERTC.
How the ERTC Impacts Employment and Bottom Line
Just as the impact of COVID-19 continues to affect many business owners, the ERTC’s impact continues today.
This refundable payroll tax credit can provide 50% of up to $10,000 per employee for each quarter you qualify for in 2020. For 2021, you can collect 70% of up to $10,000 per employee.
If your business had 100 or fewer employees in 2020 or 500 or fewer in 2021, you can claim all employee wages and benefits. If you own a larger business, you can claim wages you paid employees who couldn’t provide services in 2020 and 2021.
You can still claim the ERTC for qualifying quarters in 2020 and 2021. The deadline to file for the ERTC for 2020 is April 15, 2024, and April 15, 2025, to file for quarters in 2021.
Filing for the ERTC retroactively contributes to your bottom line, which gives you more revenue to reinvest in your business. However, if you qualify for the employee retention tax credit (ERTC), note that it will increase your taxable income. While it isn’t taxable income itself, it reduces your deductible wages.
Maximize Your Bottom Line With Dayes Law Firm ERTC Attorneys
It isn’t too late to benefit from the ERTC’s impact. Our team at Dayes Law Firm has helped hundreds of businesses claim ERTC benefits, and yours could be next. You only have so much time to file retroactively, so don’t wait another second. Call us today at 866-684-8114 for a free consultation.