The COVID-19 pandemic had a serious effect on many businesses. The ERC aimed to reduce this strain by providing companies with financial aid.
The ERTC extended through 2021 means your business may be able to claim additional credits. Learn more about this extension and how it could affect your company by contacting Dayes Law Firm PC.
The Initial ERC Parameters
The Employee Retention Credit (ERC) initially allowed an eligible employer to claim qualified wages for any full-time employees they retained. These wages maxed out at 50% of $10,000 per employee per year. To count as an eligible employer, a business must:
- Have 100 employees or less
- Have either experienced a full or partial shutdown or experienced more than a 50% decline in gross receipts
Initially, the ERC was only meant to last from March 13, 2020, through December 31, 2020.
Extension Through the Consolidated Appropriations Act and American Rescue Plan Act
Unfortunately, the pandemic didn’t end in 2020. It became clear businesses would continue to struggle, so the government created an ERTC extended through the Consolidated Appropriations Act (CAA) and the American Rescue Plan Act (ARPA).
The CAA extended the deadline for the ERC through June 30, 2021. In addition, it allowed an employer to claim up to 70% of qualified wages.
The ARPA extended the deadline further to December 31, 2021, with employers able to claim 70% of qualified wages. In addition, it lowered the percentage of gross receipts needed to participate from 50% to 20% and increased the number of employees from 100 to 500.
These expansions had additional benefits. For example, they allowed eligible employers to claim up to $10,000 per employee per quarter rather than per year. In addition, they allowed employers who took advantage of other relief programs — such as the Paycheck Protection Program — to apply for the ERC for any eligible calendar quarters.
Effects of the Infrastructure Investment and Jobs Act
Initially, any business that met the standard eligibility requirements could claim qualified wages through December 31, 2021. However, the Infrastructure Investment and Jobs Act (IIJA) — passed on November 15, 2021 — retroactively changed that. Unless you qualify as a recovery startup business, you cannot claim wages after September 30, 2021.
Understandably, this may worry many business owners, especially if they requested advanced ERC payments or reduced employment tax deposits. However, there are ways to protect yourself and your business.
How To Avoid Failure To Pay Penalties
If the government provided you with advance payments, you must pay those back before your tax forms are due. If you reduced employment tax deposits, you must report the tax liability and pay the amount you initially held back.
How To Qualify as a Recovery Startup Business
Recovery startup businesses are the only ones who can claim the ERC for the last quarter of 2021. To qualify as a recovery startup:
- Your business must not have started operations until February 15, 2020, or later
- Your average annual gross receipts cannot exceed $1 million
- You must employ at least one individual
Learn More About the ERC Extension by Contacting Dayes Law Firm PC
The ERTC extension can help certain business owners pursue additional financial aid to support their operations. If you want to learn more about this extension or how to file your claim, contact Dayes Law Firm PC. We can help you file, assist if you need to amend your claim and offer reliable advice. Call (866) 257-1223 or fill out our contact form to request a free consultation.