ERTC FAQs
How Does The Employee Retention Tax Credit Work?
How to Apply for the Employee Retention Tax Credit?
Who Qualifies For The Employee Retention Tax Credit?
How To Fill Out 941x For Employee Retention Credit
Amending 1120S For Employee Retention Credit
Frequently Asked Questions
What is the Employee Rentention Credit (ERC)?
The Coronavirus Aid, Relief, and Economic Security Ac, signed into law on March 27, 2020, included two programs to assist businesses with keeping workers employe: Employee Retention Tax Credit (ERTC) administered by the Internal Revenue Service and the Payroll Protection Program (PPP) administered by the Small Business Administration.
How is ERC different from the Payroll Protection Program(PPP)?
PPP funds are not taxable as revenue and you may still take deductions for the payroll covered by PPP. The funds from the PPP are distributed based on 2.5 months of payroll and a minimum of 80% of the funds must be used on payroll to be eligible for forgiveness.
ERTC tax credits, however, are credits (or refunds) for a percentage of payroll in each quarter that you qualify. There are specific rules for determining eligibility by quarter, and limiting the dollars that can be claimed for each employee.
If I Received Funds from the PPP, Do I Still Qualify for the ERC?
The short answer is “Yes”. You can claim ERC even if you received PPP funds. In March of 2021, The American Rescue Plan Act of 2021 created expansions and modifications to existing criteria of Employee Retention Tax Credit.
Businesses that received PPP funds could now also claim ERC tax credits. ERC credits can be retroactively claimed for businesses that qualified in 2020. The ERC qualification period was extended through 9/30/21 with lower eligibility requirements.
The refundable credit amount increased from 50% of qualifying wages in 2020 to 70% in 2021. The per-employee cap on qualifying wages was increased from $10,000 for all of 2020 to $10,000 per quarter for the first 3 quarters of 2021.
How Do I Apply for the Employee Retention Tax Credit and My CPA Do This?
Unlike the Payroll Protection Program, there is technically no application process for the Employee Retention Tax Credits. You would simply claim the ERC tax credit like any other tax credit by asserting to the IRS that you can legally claim the credit.
Whether your tax accountant is a CPA or EA, they most likely only prepare Federal and State Income Tax Returns. However, ERTC credits are claimed against Employment Taxes on Form 941, and cash advanced through Form 7200.
The ERC program is quite complex, which one of the main reasons most CPA's do not mention or attempt the claim process. It is also the reason most businesses pursued the PPP loan instead.
For prior quarters, you must file an amended form (the Form 941-X) to reduce your current quarter’s tax contribution. Also, you must request a refund of excess credits.
ERC Specialists focus only in this specific tax credit in order to maximize refunds, ensure accuracy, bulletproof your claim and save time. ERC Specialists provide audit protection and peace of mind.
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