Who Benefits from the Employee Retention Tax Credit?
COVID-19 was more than a health crisis — it was an economic crisis, too. With government-mandated shutdowns, businesses had to close for extended periods of time.
Fortunately, the government provided economic relief through initiatives like the Infrastructure Investment and Jobs Act and Employee Retention Tax Credit (ERTC). If COVID-19 impacted your business, you may still be eligible for ERTC benefits.
Navigating tax procedures for businesses is difficult, but hiring a tax attorney helps ease that stress. The ERTC team at Dayes Law Firm can help you determine if your business is eligible for the ERTC.
What Is the ERTC?
The Employee Retention Tax Credit was first introduced in 2020 to combat the revenue loss businesses were experiencing from the COVID-19 pandemic. The credit incentivizes employers to keep employees on the payroll, reducing the number of jobs lost due to the pandemic.
The credit went through a significant evolution between 2020 and 2021, in which qualifications and benefits available shifted to reflect the economic circumstances of the time. For example, the credit originally covered only 50% of qualified employee wages in 2020, but Congress expanded that to 70% in 2021 to help more businesses.
Qualifications also expanded to include more businesses. In 2020, to qualify for the ERTC, your business had to experience a 50% revenue loss for the year. In 2021, you had to experience a 20% loss per quarter.
Are You Eligible for the ERTC?
ERTC benefits are available to eligible employers of any employee count. To qualify for the ERTC, your business must have experienced a halt in activity or a significant decline in gross revenue. These qualifications demand:
- A full or partial shutdown due to a government mandate
- A 50% loss in revenue for 2020
- A 20% loss per quarter for 2021
When the American Rescue Plan Act went into effect, businesses previously exempt from the ERTC could file for the credit, including:
- Colleges and schools
- Charitable organizations
New businesses that do not have revenue numbers for 2019 can use their numbers from their first quarter of business to calculate their COVID-19 loss.
Important exclusions to note are:
- You cannot qualify for the ERTC if your gross revenue surpassed 80% of your comparable revenue in 2019
- If you have an employee who qualifies for the Work Opportunity Credit, you cannot use those same wages to claim the ERTC
Qualified earnings are the wages you can use toward the ERTC. For example, in 2020, a company with 100 or more employees had to offer a specific standard of healthcare expenditures to have qualified earnings.
These qualified earnings by employee per quarter determine how much you can collect in ERTC benefits.
How Much Can I Collect From the ERTC?
Through the ERTC, you can collect 50% of qualified wages in 2020, and 70% of qualified wages in 2021. In 2020, the maximum amount you can collect credit for is $5,000 per employee. For 2021, this amount increased to $7,000 per employee.
The ERTC may cover health benefits in addition to standard employee wages, but the limits remain the same.
File for the ERTC with Experienced Tax Attorneys
It’s not too late to file for the ERTC. If you’re an employer who struggled financially during the pandemic and you meet the qualifications described above, you can still collect ERTC benefits for your losses.
Filing for the ERTC in 2023 involves filing retroactively, adjusting deductions, and submitting amended tax forms. Our team of experienced tax attorneys at Dayes Law Firm can help you through this process. Call (800) 503-2000 to schedule a free consultation today.