Find Out If Your Business Qualifies For The ERTC

Are you a business considering the Employee Retention Tax Credit (ERTC)? Or curious about who qualifies for it? Then you’ve come to the right place! The ERTC, part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, provides a refundable tax credit of up to $5000 for employers who face a 50% or greater reduction in gross receipts. Some employers have already taken advantage of it, while others are still unsure of their eligibility or how to apply. So if you’re considering taking advantage of the ERTC or just want to know more about it, buckle up, as we dive right into who qualifies and how to apply.

Key Takeaways

To qualify for the Employee Retention Tax Credit, you must have an active trade or business during 2020 which was fully or partially suspended due to a COVID-19 related governmental order. You must also meet specific employee size, salary and wages paid qualifications.

Employee Retention Tax Credit Basics

The Employee Retention Tax Credit (ERTC) is a welcome addition to the government’s coronavirus aid package, allowing companies with 500 or fewer employees to access refundable tax credits for keeping their workers on the job. Businesses may be eligible for this tax credit if they’ve been forced to close due to COVID-19, or if their gross receipts have declined by more than 50%.

Under the Employee Retention Tax Credit, employers are eligible for up to $5,000 per employee in the form of a refundable tax credit each quarter when they keep their staff employed and continue providing their healthcare benefits. The maximum amount of tax credit that can be used per employee over the entire year is $7,000. Additionally, eligible employers will receive a full Social Security payroll tax offset as well as a 20% payment towards the calculated refundable tax credit amount.

The ERTC has been an invaluable help to small businesses during the pandemic; however, it also has its flaws. Some opponents argue that the Employee Retention Tax Credit places too much burden and paperwork on small businesses that are already struggling, making it difficult and time consuming for them to get access to these funds. Others disagree, stating that this program has been extremely helpful for businesses in need of assistance during this difficult time.

Although there is some debate over the efficacy of the Employee Retention Tax Credit program, both sides agree that it is a valuable resource for small businesses in uncertain times. As we move forward into 2021 and beyond, understanding who qualifies and how to apply for this critical program is key for maintaining economic stability. In order to better understand all aspects of this initiative, let’s take a closer look at who qualifies and what you should consider when applying.

Who Qualifies?

Who qualifies for the Employee Retention Tax Credit? This has been widely debated among senior business leaders, tax advisors, and industry experts. Some argue that existing employees who meet certain criteria, including those working at businesses that have seen a significant financial downturn due to the coronavirus pandemic and experienced either a full or partial suspension of their operations, should be eligible. On the other hand, other stakeholders say that employers should allow new hires and part-time employees to qualify in order to help boost economic activity and keep businesses afloat during difficult times.

In support of making the ERTC available to all types of employees, economic data shows that the US economy has been hit hard during this time of crisis, with more than 25 million unemployed Americans as of May 2020. Meanwhile, businesses have shut down due to government restrictions and lack of customer demand. To ensure that these businesses can remain operational and continue to employ people in their communities, some suggest that existing employees must be treated equally with new hires and part-time workers when it comes to eligibility for the ERTC.

No matter what side of the debate you take on employee retention credits for businesses affected by the virus, one thing is certain: employers need assistance if they are going to survive these challenging times. By considering both existing employees who were already employed prior to the pandemic as well as new hires or eligible part-time employees, employers are better able to plan ahead for their businesses’ immediate and long-term future. With this in mind, let’s turn our attention now to understanding how existing employees fit into the equation when it comes to employee retention tax credits.

Existing Employees

Given the challenging economic climate, numerous businesses have had to institute layoffs or reductions in hours for their existing staff. As a result, many organizations are taking advantage of the Employee Retention Tax Credit in order to keep employees on payroll and help their operations continue to function. The credit, which applies to employers who experience a full or partial suspension of their business due to COVID-19, is designed to incentivize employers to retain their existing employees instead of initiating layoffs or scheduled reductions.

To be eligible for this credit, an employee must be employed by an employer during the period beginning on March 13th, 2020, through December 31st, 2020. The employer must also either suffer a decrease in gross receipts of 50% or more or be affected by government regulations limiting travel, services, and/or group activities due to the pandemic. Some argue that this credit unfairly benefits those who had already been employed prior to the impact of CID-19; however, it should be noted that while other solutions such as furloughs may present viable solutions in some cases, often these impacts create a temporary hardship with permanent repercussions; therefore incurring additional costs for employers who end up having to hire for these positions once again.

It should also be noted that certain new hires do qualify for this tax credit and can receive reimbursement for wages paid for up to $10,000 of qualified wages. In light of this information, businesses should weigh both the potential benefit and risk associated with hiring new employees versus utilizing the Employee Retention Tax Credit in order to maintain an experienced workforce. As we investigate new hire eligibility requirements next, owners and managers should keep in mind the potential long-term effects of unemployment and reduced wages on existing staff when making decisions on how best to move forward under these challenging conditions.

New Hires

In this second segment of the discussion about who qualifies for the Employee Retention Tax Credit, we’ll take a look at new hires. Generally, new hires are not eligible for the credit. However, a special provision was extended to certain groups in the recently passed Economic Aid Act. For example, under this provision, employers with more than 100 full-time employees in 2019 may claim credit on behalf of wages paid to new employees that they hire beginning February 15th and ending before December 31st of this year.

The credit applies to “first-time workers,” which includes individuals who were (1) “not employed for more than 40 hours during any period of employment by such employer during the years 2018 and 2019” (2) “had no prior service with the same or any other employer after December 31, 2019” due to positions that ceased or ended due to COVID-19 or mass layoffs prior to December 31, 2020”. Additionally, employers must ensure that these positions were “established in good faith by the taxpayer and not replaced by any other employee performing similar services” in order to maintain eligibility for the credit.

While there is an exception made for new hires under certain conditions, it remains that the Employee Retention Tax Credit is largely geared towards existing employees through its design and implementation. That being said, transitioning into our next section, it’s important to understand how businesses can calculate and apply for the credit so they can reap its associated benefits.

How Much is the Credit?

Business owners may be eligible for a credit of up to $5,000 per employee through the Employee Retention Tax Credit (ERTC). According to the Internal Revenue Service (IRS), “it’s based on 100% of wages paid over the course of 2020 up to $10,000. That means a tax credit is available if the employer paid an employee at least $10,000 in any quarter in 2020.” The amount of credit provided is 50% of qualified wages and health care costs up to $10,000 for each employee.

While it’s great that companies are able to receive this credit, there is a debate about whether or not this credit goes far enough in helping businesses make ends meet due to their need for new hires or keeping existing ones. Supporters argue that increased hiring will in turn boost productivity and reduce rates, while opponents argue that businesses should be offered more financial aid, such as lower interest rates or faster loan payments.

The truth likely lies somewhere in between. Business owners would benefit from being provided options and resources so they can make the best decisions for their companies and tackle difficult financial situations during these trying times. It’s also important to understand what other incentives and benefits are available to employers beyond financial aid packages. Such insight could help employers save time and maximize their job duties, resulting in achieving greater efficiency and effectiveness over the long term.

It’s safe to say that providing small businesses with alternatives when thinking about their finances is essential. Next we will explore ways employers can look into other incentives & benefits besides just financial aid packages that could help offset some of their challenges going forward as a result of COVID-19.

Other Incentives & Benefits for Employers

The Employee Retention Tax Credit is an important benefit for businesses that are struggling financially due to the pandemic. However, there are other incentives and benefits available to employers that can help boost employee morale and reduce turnover. From idea-generating programs to workplace wellness initiatives, employers have a variety of options when it comes to incentivizing their workforce.

One type of incentive program is a “challenge” approach, which encourages team members to think outside the box and come up with solutions to difficult problems. This helps build a culture of collaboration and creativity within the organization by giving staff members the freedom and autonomy to suggest ideas and initiate projects. In addition, structured rewards can be created to promote positive behavior, such as offering extra vacation days or cash bonuses for ideas that are implemented successfully.

Another option for employers is implementing workplace wellness initiatives. Programs like fitness classes, meditation sessions, and mental health services can not only improve employee health and job satisfaction, but can also positively impact the company’s bottom line. Studies have shown that employees who engage in regular physical activity or receive access to mental health services tend to take fewer sick days, have lower stress levels, and are generally more satisfied with their jobs than employees without these benefits.

Overall, it’s important for employers to recognize that different types of incentives can be beneficial in multiple ways. For example, while the Employee Retention Tax Credit is an effective way to offer financial relief during tough times, social incentives like challenge programs or wellness initiatives might be just as effective in improving morale and fostering loyalty among employees. As such, employers should explore all available options before making a decision on which type of incentives or benefits they want to offer their staff.

• The Employee Retention Tax Credit (ERTC) is available to employers whose business has been affected by COVID-19, which was in operation on March 12, 2020, and who have kept both full-time and part-time employees on payroll.
• Employers can claim a refundable tax credit of 50% of wages paid up to $10,000 for all calendar quarters, with a maximum credit of $5,000 per employee.
• According to the IRS, some types of employers may not be eligible to claim the ERTC, such as state and local governments and their political subdivisions, small businesses receiving assistance through the Paycheck Protection Program (PPP), and businesses that had more than 100 full-time employees in 2019.

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