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January 06.2022
1 Minute Read

Employee Retention Tax Credit: Huge Opportunity ... Huge Cash Payments. Thank you, President Biden

Business Owners ... Listen Up! Big cash payments may be offered to you with ERC (ERTC) tax credit. (Employee Retention Tax Credit)

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I'm dedicated to getting this word out: 

Business owners who have done their best to maintain their employees through the corona difficulties are being rewarded with a renewal of the very best of the CARES Act (remember PPP?) with generous tax credits (or cash payments) balancing 10s of thousands as much as hundreds of countless dollars. However ... this is a time minimal extension of this federal government program. We can thank President Biden for signing the Infrastructure Investment and Jobs Act into law, extending the sundown date of the ERC. 

The employee retention tax credit (ERC/ERTC) has been indispensable for some, but relatively too late for lots of others. " This does not mean the ERC was eliminated. To the contrary, eligible companies can still obtain stimulus funds based upon their quarterly financials in between 3/13/2020 -9/ 30/2021," said John Gentille, CRO at ERC Today.


The ERC was established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, in March 2020. This tax credit was planned to assist organizations maintain their workforces and prevent layoffs throughout the coronavirus pandemic. It offers a per employee credit to qualified businesses based on a percentage of qualified salaries and health insurance advantages paid to staff members.

" So, exactly what is this program and how does it help me?", asks your normal entrepreneur. "And how do I learn if I qualify?" (ERTCBlueprint.com)

The CARES Act's Employee Retention Credit is a completely refundable tax credit.  For the 

2020 program

, the ERC is equal to 50% of certified wages (consisting of allocable competent health insurance expenses) that eligible employers pay their employees.  This applies to salaries paid after 3/12/2020 and prior to 1/1/2021.  The maximum quantity of incomes taken into account with regard to each employee for all calendar quarters is $10,000, so that the maximum credit for an employee is $5,000.


For the 

2021 program

, the credit is  increased to 70%, and the limit is $10,000 per quarter.  This implies the yearly maximum for an employee is $28,000.

The tax credit offsets all withheld federal work taxes consisting of federal income tax withholding, Employer FICA and Medicare. Any excess credit will be 

refunded or advanced by the IRS

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The CARES Act did not allow organizations that got Paycheck Protection Program (PPP) loans to likewise declare the ERC, however the Consolidated Appropriations Act, 2021, P.L. 116-260, which was enacted at the end of 2020, retroactively removed the restriction so employers that had obtained or gotten PPP loans might still get the ERC.

In March 2021, the IRS issued in-depth assistance (Notice 2021-20) about the ERC to resolve particular questions about eligibility requirements and computations.

" The ERC is a federal credit from the IRS handled organizations' quarterly payroll income tax return utilizing Form 941, and it is not the kind of credit that gets gone through to shareholders," Vitale said.

"The credit calculation is based upon how many employees you had for the time period when you were qualified for the credit."

Although the American Rescue Plan Act, P.L. 117-2, provided that the ERC would go through Dec. 31, 2021, infrastructure legislation awaiting President Joe Biden's signature (H.R. 3684) consists of a provision that will end the ERC for lots of organizations after Sept. 30, 2021, instead of Dec. 31, 2021.

Once Biden indications the infrastructure legislation, it will reverse the ERC for the fourth calendar quarter of 2021. The third-quarter Form 941, Employer's Quarterly Federal Tax Return, will be the final quarter eligible to be modified, and beginning Oct. 1, 2021, the ERC will be thought about ended with a suitable exception related to eligible healing startup companies.

It is a refundable payroll tax credit claimed quarterly, and it can provide reductions to payroll taxes or cash refunds.

It is available to both for-profit and not-for-profit companies, however not every business is qualified. There are two crucial tests for eligibility-- a partial or total government-ordered shutdown, or the suitable decline in gross invoices. There are 2 categories of eligible employer-- little or large-- specified in the ERC, based upon the average number of full-time employees in 2019 pre-COVID-19. The decrease in gross invoices test is based on a "significant" decrease in gross invoices in quarters of 2020 (more than 50%) and 2021 (more than 20%) compared with the same quarters in 2019. There are different rules for 2020 and 2021. "The ERC for 2020 was a little more restricted, however for 2021 it was more extensive and opened up to more possibility and higher dollars," Vitale said. At a high level, for earnings paid after March 12, 2020, and on or before Dec. 31, 2020, the credit amounts to 50% of certified salaries with a $10,000 optimum per staff member ($ 5,000) for the year 2020.

For salaries paid Jan. 1, 2021, through Sept. 30, 2021, the credit increases to 70% of qualified earnings, however the $10,000 maximum per employee is considered for each quarter (so the optimum credit is $7,000 per quarter, or $21,000 for three quarters) rather than yearly. There is no cap on the number of staff members that are paid in any quarterly duration for functions of the ERC.

 There are several subtleties to maximize the program requiring making use of well educated and informed specialists, otherwise an organization may leave 10s of countless dollars unclaimed, left on the table when it could otherwise qualify. Even if the chance was missed out on in earlier durations there is a great chance that business may discover itself qualified and able to submit a modified Form 941 for each quarter they get approved for.   

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Every company is motivated to perform their due diligence and become acquainted with the ERC provisions to figure out if they are eligible and for how much as it has the potential to provide a huge influx of funds to the company, funds that will be available for any function.


Upon its enactment in March, the American Rescue Plan Act (ARPA) presented numerous new tax modifications, a few of which retroactively impacted 2020 returns. Making the ideal relocations now can help you reduce any surprises heading into 2022.

Compliments of:

The group at www.TaxCreditRecoveryTeam.com


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