What Are Considered Qualified Wages for the ERTC Credit?
Many business owners have the potential to get a refundable payroll tax credit of up to $26,000 per W-2 employee through the Employee Retention Credit (ERC), also sometimes known as the Employee Retention Tax Credit or ERTC. Some aren’t aware that they even qualify for the credit, or think that since they took a PPP (Paycheck Protection Program) loan, they can’t apply for the ERC, which isn’t the case.
There are a lot of misconceptions about the ERTC, or details about applying for the ERTC that scare some business owners interested in the tax credit off. For instance, calculating qualified wages is a part of an ERC application, but what are considered qualified wages for the purposes of the ERTC credit?
What is the ERTC Credit?
The ERTC credit was part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020. It was later expanded under other programs like the American Rescue Plan and the Infrastructure Investment and Jobs Act. It was meant to provide financial assistance to businesses that were impacted at the height of the COVID-19 pandemic.
For 2020, the maximum credit for an employer who qualifies for the ERC is 50 percent of the first $10,000 in qualified wages, and businesses can receive a tax credit of up to 70 percent of wages paid, plus some healthcare benefit costs to employees, per quarter for tax year 2021.
ERTC Qualified Wages
But what exactly are qualified wages for the ERTC credit? In this case, qualified wages are considered compensation paid to employees during the ERC enrollment period.
The maximum amount of qualified wages for each employee for all calendar quarters in 2020 is $10,000 – again, making the maximum credit for an employer who qualifies for the ERC 50 percent of the first $10,000 in qualified wages – up to $5,000 per employee.
Meanwhile, eligible employers can claim a credit of up to 70 percent of qualified wages paid to employees after December 31, 2020, and before October 1, 2021. For the year 2021, the tax credit is equal to 70 percent of the first $10,000 in qualified wages per quarter, making it up to $7,000 per employee per quarter.
Qualified wages can also include qualified health plan expenses, and can depend on the number of employees a business has on staff. For example, employers with fewer than an average of 100 full-time employees in 2019 can receive the credit for all employees paid wages in 2020 – but you can’t “double dip” and claim wages reported as payroll costs for PPP loan forgiveness or other tax credits for the ERC as well.
Compensation that is subject to FICA taxes and qualified health expenses can qualify as qualified wages when calculating the Employee Retention Tax Credit. But obviously, the details can be a bit complex and confusing. That’s when a reputable tax lawyer can step in and help you and your business with the ERC application process.
ERC Tax Lawyers at Dayes Law Firm
The team at Dayes Law Firm can help you work out what are considered qualified wages for the ERTC credit for your application. Our team of experienced tax attorneys has already helped many business owners apply for the refunds they’re entitled to thanks to the ERTC, and we want to help your business, too.
Our firm has a record of success when it comes to handling ERC applications for businesses – in fact, Dayes Law Firm and our partner firms have helped businesses file for more than $250 million in ERTC refunds to date!
Please contact us for a free consultation about your ERTC options. We can help you work out the details around qualified wages and the number of full-time equivalent employees your business has for the purpose of claiming the Employee Retention Credit.
You are under no obligation to work with us after the evaluation, and the initial consultation is totally free! Call today to see how the Dayes Law Firm ERC team can help you, or fill out the form on this page to learn more.