How to Claim the Employee Retention Tax Credit as a Architecture and Construction Industry?
As a construction engineer, you may be wondering how to apply for the Employee Retention Credit (ERC). The ERC is a great way for architecture, engineering and construction (AEC) companies to receive financial assistance during this difficult time.
In this article, you'll find an overview of both the 2021 and 2020 ERC credits, along with all the rules and qualifications for AEC companies to be eligible. Additionally, we'll discuss potential interactions between the ERC and both R&D Tax Credits and Paycheck Protection Programs.
So if you're looking for help understanding how to apply for employee retention credit as a construction engineer - read on.
How Does The Employee Retention Tax Credit Work?
You can quickly gain an understanding of the Employee Retention Credit (ERC) and if your company qualifies for it by taking a look at the two separate credits each year has: 2021 ERC and 2020 ERC.
The rules for 2021 are straightforward, as you only need to check that quarterly revenue is 20% or more below that same quarter's 2019 revenue. Alternatively, you can also qualify if the previous quarter's revenue is 20% below that same quarter in 2019's revenue.
For companies with less than 500 employees in 2019, they can qualify for a quarterly credit of up to 70% of wages, with a max quarterly credit of $7,000 per employee.
In contrast, 2020 requires at least a 50% drop in revenue compared to equivalent quarters in 2019; or else full or partial shutdown due to a government order affecting either the company directly or one of its suppliers.
If there are fewer than 100 monthly average full-time employees in 2019, then companies can get up to 50% wages as credit up to $5,000 annually per employee.
Companies with more than 100 employees will have difficulty qualifying since eligible wages are only those paid to employees who aren't providing services for the company.
In AEC industries common government orders include shutting down non-essential construction projects, closing permitting offices etc., all of which affect Architects and Engineers involved during Construction Administrative phases too.
Professional help from an expert may be necessary when navigating through these rules in order to maximize overall benefits while avoiding negative interactions between ERC and R&D Tax Credit/PPP loans etc.
ERTC Tax Credit Requirements
Qualifying for the ERC can be complex, so it's important to seek expert help to ensure you maximize your benefits. To qualify, companies must meet certain criteria that vary between 2020 and 2021:
- For 2021, a company must have quarterly revenue in 2021 that is 20% below the same quarter's 2019 revenue or the previous quarter's revenue must be 20% below that same quarter in 2019's revenue.
- Companies with less than 500 employees in 2019 can receive up to $7,000 per employee as a quarterly credit of 70% of wages for that quarter.
- For 2020, companies must either have a 50% drop in revenue compared to an equivalent quarter in 2019 or they must have been partially shut down due to a government order which affects them or their suppliers (not customers).
- Companies with fewer than 100 monthly average full-time employees in 2019 can receive up to $5,000 per employee as an annual credit of 50% of wages for each eligible period.
- Larger companies may only qualify if they are paying wages to employees who are not providing services during the qualifying period.
The complexity and nuances of these rules make it difficult for AEC industry professionals to navigate eligibility and maximize potential tax credits on their own. Consulting an expert is crucial for minimizing any negative interactions between ERC and other programs such as R&D Tax Credit and PPP loans while maximizing your overall benefits.
ERC for AEC Industry
In the AEC industry, government orders often affect contractors, architects, and engineers, so it's important to consider these when looking into the ERC.
During the COVID Pandemic, the most common government order in the AEC sector was the shutdown of non-essential construction projects.This type of order not only affects contractors directly but also architects and engineers who are involved in those projects during the Construction Administrative phase.
On top of that, other government orders that close permit offices and zoning departments might also have an impact on a company's operations. In some cases, even essential construction projects can be affected by a government order related to Canadian border steel supply issues.
When applying for the 2020 Employee Retention Credit, companies with less than 100 full-time employees can get up to 50% of wages as credit up to a max annual amount per employee of $5,000. For companies with more than 100 full-time employees, however, they are only eligible if their wages are paid to employees not providing any services to them at all. Additionally, for both 2020 and 2021 quarters need to show either a 50% or 20% drop in revenue respectively from 2019 in order to qualify for credit under the ERC program.
It's important to remember that the ERC has negative interactions with R&D Tax Credit and PPP programs, which could reduce your company's overall benefits if you don't take care when navigating through these credits. Therefore, it's always best practice to consult an expert when trying to apply for this tax credit so you can maximize its potential benefit for your business.
How Do I Qualify for ERC in 2021
It's important to understand the intricacies of the 2021 credit, so you can make sure your company gets the most out of it!
The rules for 2021 are relatively straightforward. To qualify for this credit, revenue for the quarter must be 20% below that same quarter in 2019's revenue or else the previous quarter's revenue must be 20% lower than its equivalent in 2019. Companies with fewer than 500 full-time employees on average per month in 2019 are eligible for a quarterly credit of 70%, up to a maximum of $7,000 per employee. Companies with more than 500 employees may only claim eligible wages paid to employees who are not providing services to the company.
In addition, when calculating 2020's Employee Retention Credit (ERC), there is an annual cap of 50% of wages up to $10,000. Companies must have either experienced at least a 50% drop in revenue or been subject to a government order partially or fully shutting down their business operations due to COVID-19 restrictions. Any partial shutdown must reduce their overall revenue by 10%. Lastly, companies with less than 100 full-time employees can get up to 50% of wages up to a $5,000 annual credit per employee.
It is essential that businesses thoroughly understand these rules and consult an expert when trying to navigate this tax credit as it could negatively interact with other benefits such as R&D Tax Credits and Paycheck Protection Program (PPP). An expert will help maximize overall benefits while minimizing those interactions.
ERC 2020 Qualifications
Gain an understanding of the Employee Retention Credit and how it could benefit your business - you'll want to be sure you're taking advantage of all eligible opportunities! The ERC is available for both 2020 and 2021, though the rules vary slightly between years.
Here are some key points to consider about this credit:
1. Companies with fewer than 500 employees in 2019 may qualify for a quarterly credit of up to 70% of wages, capped at $7,000 per employee each quarter.
2. For companies with more than 500 employees, only wages paid to employees not providing services can qualify for the credit.
3. In 2021, qualifying revenue drops must be 20% below the same quarter's 2019 revenue or the previous quarter's revenue must be 20% below that same quarter in 2019's revenue; while in 2020 qualifying revenue drops must be 50% below that same quarter's 2019 revenue or there must have been a partial or full government shutdown due to an order affecting either the company or one of its suppliers (not customers).
4. There is also an annual cap on credits claimed for 2020 (50% wages up to $10,000 per employee) and a different annual cap for those claiming credits in 2021 (70% wages up to $7,000 per employee).
Considering all these details when attempting to apply for this credit is important because incorrect calculations can lead to penalties from the IRS. Additionally, interactions with other tax credits like R&D Tax Credit and PPP should also be taken into account when filing so as not to reduce overall benefits received by your company.
Understanding all these intricacies will help ensure your business takes full advantage of any applicable ERC benefits!
R&D Tax Credit and ERC
Discover how the Employee Retention Credit can impact your R&D Tax Credit and learn how to get the most out of both.
It's important to understand that while the ERC and R&D Tax Credits are separate credits, they do interact with each other. The ERC can offset certain expenditure types that would otherwise be considered eligible for the R&D Tax Credit. This means if you claim both credits, you will need to ensure you properly allocate expenses between them in order to maximize your benefit.
Additionally, when filing for the ERC, it's important to note that wages paid with PPP funds can't be included in any calculation or credit amount associated with the ERC.
When it comes time to file taxes and take advantage of these credits, it's vital that a company consults an expert who understands both credits and their interactions. An expert can help minimize any potential negative interactions between these two critical tax breaks and help maximize overall benefits as much as possible.
Furthermore, they can shed light on which expenses qualify for either credit so companies don't miss out on any potential savings from either one of them.
So if you're considering applying for both credits, make sure you speak with an expert first so you don't leave money on the table!
Doing this will ensure that your company gets all of its due benefits when taking advantage of both programs at once.
ERC Credit and PPP Loan Forgiveness
When leveraging the ERC, it's essential to be aware of how PPP funds interact with the calculation and credit amounting associated with the ERC, in order to maximize overall benefits.
The potential for negative interactions between the ERC and PPP exist when an employer is claiming both credits. Employers who receive a loan under the Paycheck Protection Program (PPP) may not use their PPP loan proceeds to pay for wages that are eligible for tax credits such as ERC or Family First Coronavirus Response Act (FFCRA).
In other words, if an employer uses PPP loan funds to pay wages that were used to calculate employee retention credits, those payroll expenses would no longer be eligible for any payroll tax credits. It is important to note that employers can still claim their employee retention credit on qualified wages even if they have already received a forgiven PPP loan.
However, these two programs cannot be used in combination – meaning one cannot double dip by using a portion of their forgiven PPP loan money towards qualified wages that can also receive a separate employment tax credit/incentive.
Moreover, employers should also consider filing Form 941-X as soon as possible after learning about the interaction between the two incentives. Filing Form 941-X allows employers to correct overpayments resulting from claiming both credits at once by refunding excess taxes paid due to taking them together instead of separately.
Additionally, this form must be filed before filing Form 940 or Form 1040 quarterly return (employer's annual federal unemployment tax return) because it counts as an amended return and does not require additional IRS forms or schedules beyond what was included on your original quarterly returns.
By understanding these key points when applying for employment retention credits alongside PPP loans, construction engineers can ensure they are getting all allowable benefits while avoiding costly penalties due to incorrect filings or miscommunication of information with government entities.
How Do I Apply For Employee Retention Credit As A Construction Engineer?
You now have the information you need to apply for the Employee Retention Credit. Understanding the criteria, intricacies, and interactions of both 2021 and 2020 credits is essential for AEC companies to make sure they're taking advantage of all available financial assistance.
Covid-related government orders in this sector affects contractors, architects, and engineers in the form of a shutdown of non-essential construction projects.
Make sure to keep up with government orders that could affect your eligibility so you don't miss out on potential savings or benefits. With a bit of research and preparation, you can maximize your ERC savings and get back on track.
More and more businesses are becoming aware of this critical and advantageous tax credit. Therefore, processing time is increasing. To get started today and begin fast-tracking your claim, click the button below to be taken to the secure Linqqs portal and fill out the brief qualification form.
Employee Retention Tax Credit 2023 Deadline
Now that we know the qualifications for the Employee Retention Tax Credit, let's move on to when it needs to be filed by.
The present deadline is April 15th, 2025.This means that if you are looking to apply for this credit during any of these years, make sure you do so before those dates.
It’s important to note that even though there are many opportunities throughout the year to apply for different tax credits or deductions, ERC only has a single filing window per year. So don't miss out! It’s also worth noting that applying late could mean that you won't qualify for the maximum amount possible.
When it comes down to it, making sure you take advantage of all available credits and deductions is essential when filing taxes - especially ones like ERC which have such a short window of opportunity each year. Keep an eye out and make sure not to miss deadlines or else you may end up losing out on some valuable savings.
Frequently Asked Questions
What is the Employee Rentention Program (ERTC)?
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 ERTC 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 ERTC?
The short answer is “Yes”. You can claim ERTC 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 ERTC tax credits. ERTC credits can be retroactively claimed for businesses that qualified in 2020. The ERTC 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 Renention 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 ERTC 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 ERTC 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.
ERTC 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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