If you’re a business owner, you’ve probably heard a lot about the Employee Retention Tax Credit, sometimes referred to as the ERTC or ERC. But you might not be aware of the history of the ERTC, and why it’s such an important program for so many businesses.
About the ERTC
The ERTC is a fully refundable tax credit for businesses and tax-exempt organizations and is “available to eligible employers that paid qualified wages to some or all employees after March 12, 2020, and before January 1, 2022,” according to the IRS.
Business owners can claim the tax credit on qualified wages paid to their employees if they kept staff on payroll even in the face of significant financial setbacks during the height of the COVID-19 pandemic back in 2020 and 2021.
Employers that experienced either a full or partial shutdown of operations due to governmental orders related to COVID-19, or that saw their business experience a decline in gross receipts in 2020 or 2021 as compared to the same quarter in 2019, may be qualified to apply for the ERTC. An experienced tax professional like the ones at Dayes Law Firm can help determine if your business can apply before upcoming ERTC deadlines.
History of the ERTC
The ERTC was initially part of the CARES Act, also known as the Coronavirus Aid, Relief, and Economic Security Act. The $2 trillion stimulus bill was passed in March 2020, and part of its goal was to support businesses during the first months of the COVID-19 pandemic.
At first, the credit was for eligible wages paid between March 12, 2020, and December 31, 2020. At the time, the ERTC was not available to recipients of Paycheck Protection Program (PPP) loans.
But as part of the Consolidated Appropriations Act (CAA), the tax credit was extended through June 30, 2021. And some of the details for qualification to apply changed. For example, the credit became worth 70 percent of up to $10,000 of qualified wages per employee per quarter instead of yearly.
For the purposes of the ERTC, at this time, the meaning of “large employer” was changed to mean those with more than 500 full-time employees. Plus, the CAA made it so PPP recipients could apply for the Employee Retention Tax Credit – provided the payroll identified for the ERTC was not paid out of PPP funds.
More Changes to the ERTC
Later, the American Rescue Plan Act of 2021 (ARPA) modified the ERTC further. It was extended through December 31, 2021, and some Recovery Startup Businesses could be eligible for a quarterly credit of up to $50,000.
But the Infrastructure Investment and Jobs Act, signed into law on November 15, 2021, changed the dates of the ARPA ERTC extension. For many businesses, at that point, the ERTC applied to wages paid between July 1, 2021, and September 30, 2021.
“Most taxpayers became ineligible to claim the ERC for wages paid after September 30, 2021,” according to the IRS. But Recovery Startup Businesses are still eligible to claim the Employee Retention Tax Credit for wages paid after June 30, 2021, and before January 1, 2022.
That’s generally where the ERTC stands today! Many businesses are still able to retroactively apply for the credit, although with all the changes involved and the potential for a possible IRS audit, we recommend getting help from a team experienced in dealing with the Employee Retention Tax Credit if you’re looking to apply now.
Dayes Law Firm can work with you to apply for the ERTC. Our team can help you file the right amended quarterly payroll tax returns on your behalf and support you every step of the way – we even offer an IRS audit defense, should you need it.
Please contact us to see how the ERTC professionals at Dayes can help you and your business with your ERTC application. Feel free to give us a call at 1-866-875-1005 or fill out the form on this page to get in touch. We want to make sure you see every bit of the ERTC refund your business is entitled to, so please – reach out at your earliest convenience, and someone from our team will be in touch soon!