LOS ANGELES, CA / ACCESSWIRE / March 31, 2023 / The Employee Retention Credit (ERC) tax refund program from the Internal Revenue Service (IRS) was designed for small to medium-sized business (SMB) owners that struggled. It could have been financially through a significant decline in gross receipts, mandated government shutdowns and partial shutdowns, or even business operation disruptions due to the COVID-19 pandemic. A common misconception is that all of these had to occur in order for companies to qualify for the ERC tax credit. However, that is a costly false assumption. Any one of these will automatically qualify a quarter from the past 2020 or 2021 employee wages paid if they meet certain criteria, and there is still time to file amended 941-X quarterly payroll tax returns.
Employee Retention Credit Small Business Guide to ERC Tax Credits from Disaster Loan Advisors. Image Credit: FeverPitched / 123rf.
"With all the mis-information and complexities of the Employee Retention Credit program from the IRS, we've created a comprehensive, yet simplified guide explaining exactly how employee retention credits can be qualified and claimed. Our ERC tax credit guide was created in a short and easy-to-understand ERC video," said Marty Stewart, Chief Strategy Officer (CSO) with Disaster Loan Advisors (DLA).
What is the Employee Retention Tax Credit (ERC)?
The Employee Retention Tax Credit (ERTC) is a refundable tax credit available to employers who retained employees and paid them wages during the COVID-19 pandemic. The ERTC was enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
Eligible employers can receive a refundable credit of up to 50% of eligible wages (in 2020) for the whole year, and up to 70% (in 2021) per quarter. This is for wages paid out to employees between March 13, 2020 and September 31, 2021 for companies that were already in business when the pandemic hit. And, through December 31, 2021 if the company was started or purchased after February 20, 2020, defined by the IRS as a Recovery Startup Business (RSB).
How Much is the Employee Retention Tax Credit (ERTC) Worth?
The Employee Retention Tax Credit can be a lucrative cash windfall for employers that do qualify. Companies could receive up to a maximum of $5,000 per employee in all of 2020. For 2021, there is a maximum of $7,000 per employee, per quarter. With 2021 being a more lucrative year for the ERC tax credit, there is up to $21,000 to $28,000 per employee could be claimed, depending on multiple factors.
Larger companies must be mindful of ERC program constraints linked to their overall number of full-time employees (FTE) and part-time employees (PTE) wages. For example, if businesses had more than 100 employees in any quarter in 2020, or more than 500 employees in any quarter in 2021,
Who Qualifies for the Employee Retention Tax Credit (ERTC)?
To qualify for the ERTC tax credit, companies must correctly qualify a quarter per IRS guidelines, prior to the tax credit for that quarter being calculated.
- Employers of any size are eligible, including tax-exempt organizations, that had W-2 employees on payroll during the 2020 or 2021 tax years.
- 1099 Independent Contractors (IC) do not qualify, and may not be counted towards qualified wages in eligible quarters.
- Employers who have experienced a full or partial shutdown due to mandated government executive orders, business capacity restrictions, supply chain issues, and others. Employers should note there are specific criteria that must be met in order to qualify under one of these eligibility factors to claim the ERTC tax credit.
- Businesses that received Paycheck Protection Program (PPP) loans may still be eligible for the ERTC. They just need to be deducted properly from employee retention credit calculations. For example, an employer can't claim both PPP loan forgiveness and ERTC credits with respect to the same employee's wages during overlapping time periods. If an employer receives PPP loan forgiveness for a particular wage expense, they can't claim it as part of their ERTC calculation.
- Eligible wages include those paid during periods when business operations were either fully or partially suspended due to a governmental order related to COVID-19, or when gross receipts in any quarter had declined by more than -50% in 2020 vs. 2019. Or, any quarter had declined by more than -20% in 2021 vs. 2019.
How Can Employers Claim the Employee Retention Tax Credit?
IRS Form 941-X Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund is the exact IRS form that needs to be filled out correctly for each qualifying employee retention credit quarter. It sounds simple, however, it is not.
"It is a must for small business owners to cut through the confusion of the Employee Retention Tax Credit program. Companies should seek an ERC specialist like Disaster Loan Advisors who specializes in the complex Employee Retention Credit," said Stewart from DLA.
Small businesses and companies should seek out the expertise of an ERC specialist to ensure accuracy when figuring ERC qualifications and claiming the ERC tax credit. Remember, not every employer will qualify or even receive the maximum employee retention credits available. Therefore, it is important to understand your specific business situation in order to know what ERC refund amount you should expect back from the IRS.
About Disaster Loan Advisors™ Employee Retention Credit (ERC) Services
Disaster Loan Advisors™ (DLA) is a trusted team of financial tax professionals and Employee Retention Credit (ERC) consulting specialists dedicated to saving businesses from lost sales, lost customers, lost revenue due to financial and economic harm caused by the COVID-19 / Coronavirus disaster, Delta and Omicron variants, and other recession and inflation downturns in the economy.
Having worked with over 1500+ business clients navigate the SBA Economic Injury Disaster Loan (EIDL), Paycheck Protection Program (PPP), and Restaurant Revitalization Fund (RRF) programs, DLA further refined its expertise in the ERC Tax Credit program assisting ownership groups with multiple business entities, multiple location business owners, and other complex situations that require an expert strategist to be brought in to assess the situation and create the most strategic path forward.
DLA further specializes in another key pandemic-era SBA / IRS program where business owners are leaving a lot of relief fund money on the table. It is the often misunderstood and confusing Employee Retention Tax Credit (ERC) / Employee Retention Tax Credit (ERTC) program whereby business owners can retroactively receive up to $26,000 back for each W-2 employee they had on payroll for the 2020 and 2021 tax filing years. Done correctly, these tax credits or cash refunds can be claimed retroactively for up to 3 years.
It's encouraged that business owners obtain professional assistance in going through the complex 941-X amended filing process to help your company maximize the full value of the ERC Credit Program, while staying safe and compliant within the complex IRS rules and regulations for claiming the ERC Credits.
DLA doesn't charge a percentage (%) of your ERC refund like many companies are charging. Instead, DLA works on a reasonable professional flat-fee basis. If you are looking for an ERC company that believes in providing professional ERC services and value for small business owners, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors is a good fit for you.
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SOURCE: Disaster Loan Advisors™ (DLA)
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