Even now, businesses can qualify for the Employee Retention Tax Credit retroactively. However, not everyone knows what qualifies for ERTC refunds. Many business owners know they can claim qualified wages, but that’s not all that is possible.
What Is the ERTC?
The Employee Retention Tax Credit (ERTC) is a refundable tax credit the government established in 2020 and 2021 to incentivize business owners to keep employees.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act instituted the ERTC, originally only available to businesses that hadn’t already taken PPP loans. For 2020, employers could collect up to 50% of wages at $10,000 per employee.
In December 2020, the Consolidated Appropriations Act expanded to include more businesses, as they could now claim the ERTC and PPP loans. They could now claim 70% of wages up to $10,000 per employee per quarter.
The American Rescue Plan Act of 2021 extended ERTC benefits through the first three quarters of 2021.
Unconventional Expenses That Qualify for the ERTC
Do you know what the ERTC funds? Don’t miss out on these opportunities.
Tips
You can claim tips subject to federal income tax for the ERTC. If an employee collects over $20 in a calendar month, you can claim it for the ERTC.
Minority Owners’ Wages
Typically, business owners’ wages do not qualify for the ERTC. However, you may qualify if multiple people own shares of the business. Your wages could qualify if your business ownership is less than 50%.
Health Plan Expenses and Wellness Costs
Some employers forget that the ERTC offers credit beyond standard employee wages, including healthcare plans. Remember to factor these expenses into your claim.
Payment for Training
If you paid your employees for orientation, HR training, or any other type of training, you can factor that expense into their qualified wages.
How Does the ERTC Work?
When the ERTC exceeds your tax liability, you’ll receive the extra amount as a refund. You must amend your original Form 941 for each tax period you claim to file for the ERTC retroactively.
When claiming the Employee Retention Credit, remember that you cannot claim the same wages for the ERTC that you used a PPP loan to pay.
Once you file, it can take between six months and a year to collect your refund.
Qualifications for the ERTC
You must know whether you qualify before determining what else you can claim for the ERTC. Two tests dictate your eligibility.
The gross receipts test uses your gross receipts to calculate quarterly lost revenue. Accounting for the same quarters in 2019, compare your decline in gross receipts in 2020 and 2021. If you see a 50% loss in 2020 or a 20% loss in 2021, you can claim the ERTC.
You may also qualify if your business had to suspend regular operations in response to a government order. This includes:
- Reduction in business hours
- Altering business model
- Disruptions in the supply chain
- Social distancing requirements
Next, determine whether you’re a small or large business as defined by the IRS. Small businesses had 100 or fewer full-time employees in 2020 and 500 or fewer in 2021.
Filing for the ERTC? Contact Dayes Law Firm
Now that you know what the ERTC funds, you can take the next step and file your claim.
The ERTC has expanded and changed over time. The qualifications, rules, and process can be complex. You don’t have to do it alone. Dayes Law Firm has helped hundreds of businesses file for the ERTC, and you could be next.
Don’t wait — timing matters. Contact us at 866-567-4510 for a free consultation.