Employee Retention Credit Help Center

Everything you need to know about the Employee Retention Tax Credit

Scroll down to review our extensive Employee Retention Credit documentation.

Qualification Requirements

Calculate Your Employee Retention Credit

Review the application

(Powered By Accelerate America LLC)

IRS Resources

How to Identify Legitimate ERC Providers

Questions? Call us(262) 500-4276

Frequently Asked Questions About the Employee Retention Credit

how does the employee retention credit work

How does employee retention credit work?

How does employee retention credit work? The employee retention credit (ERC) is a tax credit that can be refunded to businesses that qualify. The eligibility criteria include factors like the employee cap and the amount of qualified wages paid.

Business owners who meet the specific qualifications can receive a percentage of the qualified wages paid to their employees after march 12, 2020, and before January 1, 2021. This refundable tax credit is intended to provide financial support to eligible businesses.

Who qualifies for the employee retention credit?

The program considers employers eligible if they faced partial shutdowns caused by government orders that restricted commerce, travel or group gatherings. Alternatively, if an employer's quarterly gross receipts experienced a significant decrease compared to their 2019 gross receipts due to the pandemic, they may also qualify as eligible employers.

It's important to note that your business may be eligible for the program even if it did not completely shut down due to government orders or experience a reduction in revenue. There are additional nuances involved in this provision that should be taken into consideration. To learn more about this provision, visit this page.

how to apply for the employee retention credit

How to apply for employee retention credit?

To apply for the Employee Retention Tax Credit, employers must complete and submit Form 941-X, which is also known as the Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, along with their quarterly federal tax return.

It's crucial to understand that while the 941-X form contains the results of the ERC Credit calculation, it doesn't serve as an eligibility test for the credit. To qualify for the employee retention credit, you must have the necessary documentation in place to demonstrate a reduction in revenue or a more than nominal impact to your business due to a government order. Ensuring that you have the proper documentation is critical to receiving the tax credit. If you're ready to apply, you can visit the relevant page for more information.

What is the deadline for employee retention credit?

The deadline for claiming the Employee Retention Credit (ERC) depends on the tax year in which it is being claimed. For the 2020 tax year, the deadline to claim the ERC is July 15, 2021. For the 2021 tax year, the deadline is December 31, 2022. It's important to note that businesses may need to file amended employment tax returns (Form 941-X) to claim the credit for prior quarters. The deadline for filing amended returns generally falls three years from the original due date of the return or two years from the date the tax was paid, whichever is later.

Is the employee retention credit taxable income?

The Employee Retention Credit (ERC) is a beneficial tax credit that can be claimed by businesses for keeping their employees on the payroll during the COVID-19 pandemic. While the ERC is not included as part of gross income for employees, it is still subject to regulations regarding disallowed expenses. As a result, it's important to understand the rules surrounding disallowed expenses to ensure that you're correctly applying for and utilizing the tax credit.

Can I claim employee retention credit and PPP?

Yes, it is possible to use both PPP funds and the ERC. While an employer cannot include wages funded by a PPP loan in the ERC calculation, it's worth noting that PPP funds typically only cover eight to ten weeks of wage expenses, while the eligibility periods for the ERC are longer. Additionally, PPP loans can be used for non-wage expenses, which the ERC cannot cover.

When it comes to utilizing the ERC, it's crucial to maintain accurate records that demonstrate how the PPP funding was used across the entire 24-week covered period. PPP funding may be allocated to wages that are not eligible for the ERC, such as wages paid to company owners or wages exceeding $10,000 in one of the four ERC credit-generating periods. Being mindful of these factors can help businesses take full advantage of both the PPP and ERC programs.

Does the ERC credit have to be paid back?

No, the Employee Retention Credit (ERC) is not a loan. It is a tax credit that eligible employers can claim against specific employment taxes, and it is fully refundable. The ERC does not need to be repaid, and for most taxpayers, the refundable credit exceeds the payroll taxes paid during a credit-generating period. In other words, the ERC can provide a significant financial benefit to qualifying businesses.

Will there be audits of the ERC?

In mid-2022, the IRS declared that it would be conducting audits of Employee Retention Credit (ERC) claims due to many businesses claiming tax credits through the program for which they were not eligible. The IRS is anticipated to scrutinize most ERC claims over the next several years, broadening the scope of targets for these audits. It's essential for businesses to ensure that they meet the eligibility criteria and have accurate records to support their ERC claims to avoid any potential issues during an audit.

There are a number of vulnerabilities the ERC presents to business owners that can lead to an audit.

Are the benefits of the Employee Retention Credit the same for large and small employers?

No, the benefits of the Employee Retention Credit (ERC) are not the same for large and small employers. Under the current rules, businesses with fewer than 500 employees are eligible for the ERC credit for all qualified wages paid between March 13, 2020, and December 31, 2021. However, businesses with more than 500 employees are only eligible for the ERC credit for wages paid to employees who are not providing services due to either a full or partial suspension of operations or a significant decline in gross receipts. Additionally, these larger businesses may only claim the ERC for wages paid between March 13, 2020, and June 30, 2021.

Is the Employee Retention Credit only for full-time employees?

No, the Employee Retention Credit (ERC) is not only for full-time employees. Both full-time and part-time employees are eligible for the credit, as long as they meet the other eligibility criteria. The amount of the credit is based on the qualified wages paid to each eligible employee, up to a maximum of $10,000 in qualified wages per employee per quarter.

What are the ERC eligibility / credit-generating periods?

The eligibility or credit-generating periods for the Employee Retention Credit (ERC) are the time periods during which an eligible employer may claim the credit. For the ERC, there are several eligibility periods:

The first eligibility period is from March 13, 2020, to December 31, 2020.
The second eligibility period is from January 1, 2021, to June 30, 2021.
The third eligibility period is from July 1, 2021, to December 31, 2021.

Each eligibility period has specific requirements and limitations, and the credit amount and calculation may differ between periods. Employers can only claim the credit for wages paid during these specific periods, and there are additional requirements that must be met to be eligible for the credit.

Important Information To Consider Before Filing Your Employee Retention Credit in 2023

How to record the employee retention tax credit?

To record the Employee Retention Tax Credit (ERTC), the employer should create a separate account in their general ledger for the credit. The amount of the credit should be recorded as a credit to this account on the date the credit is claimed.

When preparing Form 941, the employer should adjust the amount of the liability for the social security tax on the form by the amount of the ERTC claimed. The credit should be reported on line 11c of Form 941 and on Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers.

It's important for employers to keep detailed records of the ERTC claimed and the calculations used to determine the credit. This documentation should be retained for at least four years after the due date of the return on which the credit was claimed. You should consult with your company’s CPA for details, as this is meant to be a generalization and not financial advice.

What is an eligible employer for the ERC program?

An eligible employer for the Employee Retention Credit (ERC) program is a business that has experienced a significant decline in gross receipts or has been fully or partially suspended due to a government order related to COVID-19. Specifically, eligible employers are those whose gross receipts for a quarter in 2020 are less than 50% of their gross receipts for the same quarter in 2019.

For 2021, the Employee Retention Credit (ERC) is available to eligible employers who have experienced either a full or partial suspension of their operations due to a government order related to COVID-19 or a significant decline in gross receipts. Specifically, eligible employers are those whose gross receipts for a quarter in 2021 are less than 80% of their gross receipts for the same quarter in 2019.

Alternatively, eligible employers are those whose business operations have been fully or partially suspended due to a government order related to COVID-19. This includes businesses that had to close their physical locations or reduce their hours of operation due to government orders.

It's important to note that certain employers are not eligible for the ERC program, such as state and local governments and their instrumentalities, small business investment companies, and organizations receiving Paycheck Protection Program loans.

Do employers have to pay back the ERC tax credit?

No, employers are not required to repay the Employee Retention Tax Credit (ERTC). This tax credit is designed to aid eligible businesses in covering expenses incurred due to the COVID-19 pandemic and is fully refundable. To qualify for the ERTC, businesses must meet specific criteria set by the Internal Revenue Service and provide evidence of their losses.

It's important to note that the ERTC is a refundable credit, which means that businesses can receive a refund for any credit amount that exceeds their payroll taxes paid in a credit-generating period. This can be a significant financial support for businesses during difficult times.

However, it's crucial for businesses to accurately calculate their qualified wages and meet the eligibility criteria to avoid any potential audit or penalties. The IRS is expected to conduct audits of ERTC claims over the next several years, so it's important for businesses to keep proper records and documentation to support their claims.

Are employees eligible for the erc credit

Are all employees eligible for the ERC tax credit?

It's important to note that not all employees are eligible for the Employee Retention Credit (ERC) tax credit, and the eligibility criteria may vary based on the size of the employer. For example, at companies with fewer than 100 full-time employees, all full-time and full-time equivalent employees are eligible for the ERC tax credit.

However, at companies with over 100 full-time employees, only wages paid to employees between March 12, 2020, and January 1, 2021, may be considered as qualified wages. This means that wages paid to employees after January 1, 2021, are not eligible for the ERC tax credit if the employer has over 100 full-time employees.

In addition to the size of the employer, other factors such as the impact of the pandemic on the business operations and the documentation provided to support the eligibility may also affect the ERC tax credit eligibility.

It's important for businesses to understand the ERC eligibility criteria and properly calculate their qualified wages to claim the credit accurately. The IRS provides guidance and resources to help businesses navigate the ERC tax credit eligibility criteria and application process.

What are the aggregation rules for the ERC?

The Employee Retention Credit (ERC) aggregation rules are used to determine the eligibility of employers for the credit when multiple entities are involved. These rules apply when an employer is part of a larger organization that consists of several related entities, including parent-subsidiary groups and controlled groups of corporations.

Under these rules, businesses that are considered a single employer under the Family and Medical Leave Act (FMLA) or the Internal Revenue Code (IRC) are treated as one employer for the purpose of calculating the credit. This means that if multiple entities are part of a controlled group or a parent-subsidiary group, their wages and qualified expenses are aggregated, and the credit is calculated based on the total amount.

It's important for businesses to understand these rules and properly calculate their ERC eligibility, as errors or miscalculations can result in penalties or interest charges. The IRS website provides guidance and resources to help businesses navigate the ERC aggregation rules and claim the credit accurately.

What are the employee retention credit rules?

The Employee Retention Credit (ERC) is a tax credit designed to incentivize businesses that kept employees on payroll during the COVID-19 pandemic. It is a refundable tax credit available to eligible employers who can demonstrate that their business was adversely impacted by partial or full shutdowns or a decline in revenue in 2020 or 2021.

The credit is intended to provide critical financial support to employers who have had to deal with unexpected challenges and uncertainties brought about by the pandemic. By encouraging employers to keep their employees on payroll, the ERC aims to support economic recovery and stability during this difficult time.

How to start the Employee Retention Credit 2023 application

To claim the Employee Retention Credit (ERC), businesses must submit Form 941, which is the Employer's Quarterly Federal Tax Return, for each eligible quarter between January 1, 2021, and June 30, 2021. However, the ERC application process can be challenging for some businesses due to the complexity of the eligibility criteria and the required documentation.

If you're unsure about how to apply for the ERC or need assistance with the application process, the IRS website provides helpful resources and guidance. Alternatively, you can seek help from an ERC service provider who can assist you in preparing and submitting your ERC application accurately and on time.

Visit this page to learn how to identify a legitimate ERC provider.

How to file for employee retention credit in 2023

To apply for the Employee Retention Credit (ERC), businesses must initiate the filing process with the IRS. This includes providing basic details about the company and its employees, as well as evidence of the impact of the pandemic on the business operations.

Once the application is received, the IRS will review the eligibility of the business for the credit. If approved, the credit will be applied to offset future payroll taxes. The Employee Retention Credit can provide critical financial support to businesses that are struggling to maintain their workforce during the pandemic.

Is the employee retention credit still available in 2023?

The short answer is yes. The Employee Retention Tax Credit (ERC) is applicable to wages and benefits paid between March 13, 2020, and September 30 or December 31, 2021, depending on the specific eligibility criteria.

However, businesses can still apply for the ERC and receive the credit if they meet the eligibility criteria and comply with the program rules. In reality, companies have until April 15, 2024, to submit their applications and receive a refund if they are eligible.

How much is the Employee Retention Credit

The Employee Retention Credit (ERC) is a tax credit that equals 50% of the qualified wages paid by the employer to its employees, with a maximum of $10,000 in qualified wages per employee. This implies that the maximum credit an employer can receive is $5,000 per employee.

To qualify for the credit, the employer must have faced a significant decline in gross receipts or halted operations due to a government order related to COVID-19. Furthermore, the employer must have retained its employees during the applicable period and paid them at least $600 in qualified wages during that time. Qualified wages include salary, hourly pay, commissions, and other forms of compensation.

The Employee Retention Credit is available for wage payments made from March 13, 2020, to December 31, 2020. It's important to note that businesses must meet the eligibility criteria and have accurate documentation to support their ERC claims to avoid any potential issues during an audit.

How to calculate Employee Retention Credit

The Employee Retention Credit (ERC) is calculated as 50% of the qualified wages paid to eligible employees, up to a maximum of $10,000 of wages per employee per quarter. To calculate the ERC, businesses must first determine the number of eligible employees and the total amount of qualified wages paid to those employees during the relevant quarter.

It's essential to note that the qualifying wages are limited to $10,000 per employee for all quarters. If an employee received more than $10,000 in qualified wages in a quarter, only $5,000 of those wages will count towards the credit.

Once the total amount of qualified wages paid has been determined, multiply that amount by 50% to calculate the ERC. For instance, if an employer has 10 eligible employees and pays each employee $10,000 in qualified wages during a quarter, the employer would be entitled to a credit of $50,000 ($10,000 x 10 employees x 50%).

To calculate your Employee Retention Credit, visit this page.

How to claim Employee Retention Credit (2023)

To apply for the Employee Retention Credit (ERC), employers need to complete Form 941, Schedule R. The credit is equal to 50% of the qualified wages paid to each employee until the end of 2021. To qualify for the ERC, employers must have experienced a disruption in their business operations or a decrease in their gross receipts due to the pandemic. They must also maintain their pre-pandemic workforce levels.

Unlike PPP loans, most businesses are eligible for the ERC, and there is no requirement to demonstrate a decrease in revenue. However, if a decline in revenue does occur, the grant is automatically granted. It's important to note that businesses must meet the eligibility criteria and have accurate documentation to support their ERC claims to avoid any potential issues during an audit.

People Also Ask These Questions About The Employee Retention Credit Application Process

Why is it important to apply for the employee retention tax credit?

Applying for the Employee Retention Tax Credit (ERTC) is important for eligible employers because it provides crucial financial support to businesses that have been affected by the COVID-19 pandemic. The ERTC is a refundable tax credit that can be used to offset payroll taxes and other taxes owed by the business. It is also retroactive, meaning that businesses can claim the credit for past quarters if they were eligible but did not claim it at the time.

Additionally, the ERTC can help businesses keep employees on payroll during a time of economic uncertainty. This can improve employee morale and retention, as well as maintain continuity of operations for the business.

Overall, applying for the ERTC can provide significant financial relief to eligible businesses and help them weather the challenges of the ongoing pandemic.

How much does it cost to sign up for the ERC?

There is no cost to sign up for the Employee Retention Tax Credit (ERTC). It is a program offered by the Internal Revenue Service (IRS) to provide financial assistance to eligible businesses that have been affected by the COVID-19 pandemic. To apply for the ERTC, businesses need to fill out the necessary forms and assemble documentation to support their eligibility. However, there are some professional services that offer assistance with the application process for a fee, but these services are not required to apply for the credit.

How did the Employee Retention Credit change under the CARES act?

The Employee Retention Tax Credit (ERTC) has become more accessible due to the expansion of eligibility brought on by the CARES Act. Previously, only businesses that had to shut down as a result of COVID-19 were qualified to receive the credit. However, the new regulations now allow businesses that have had to reduce their operations to claim the credit. This change will enable more businesses to take advantage of the ERTC credit and help them cover the costs of retaining their employees. The CARES Act also allows businesses to carry forward unused ERTC credits from 2020 into 2021, providing additional flexibility to those struggling to keep their employees. Consequently, the amendments made by the CARES Act will assist more businesses in remaining open and retaining their employees.

Employee retention credit calculation image

How can I calculate my Employee Retention Tax Credit?

Check out our Employee Retention Credit calculator by visiting this page. Because ERC calculators are typically proprietary, once you receive your initial calculation we will grant you access to our internal calculator that will allow you to enter additional information to receive a much narrower estimation of your ERC refund.

What should you know before submitting your employee retention credit application?

Before submitting your employee retention credit (ERC) application, it's important to gather all necessary documentation and ensure that you meet the eligibility requirements. This includes evidence of a decline in gross receipts or a full or partial shutdown due to COVID-19, as well as records of qualified wages paid to eligible employees. Additionally, it's important to accurately calculate the credit amount and ensure that it is properly claimed on your tax return. Working with a qualified tax professional can help ensure that your ERC application is complete and accurate.

Can you still apply for the ERC program in 2023?

Retroactively - Yes, it is still possible to apply for the Employee Retention Credit (ERC) program in 2023. To do so, businesses must file Form 941-X with the IRS. It's important to note that the deadline to file amended quarterly returns is three years from the original filing date of Form 941. For example, if a business was eligible for the ERTC program in Q3 of 2020, the amended documentation must be submitted by October 2023. The deadline to apply for the ERC tax credit is April 15, 2024.

What are ERC qualified wages?

ERC qualified wages refer to the wages and compensation paid to employees during a specific period that can be used to calculate the employee retention tax credit (ERTC). Qualified wages include salary, wages, tips, and other forms of compensation that are subject to federal income tax withholding. The amount of qualified wages that can be used to calculate the ERTC is limited to $10,000 per employee per quarter, regardless of the actual amount paid to the employee. It's important to note that not all wages paid to employees are considered qualified wages for the ERTC, and certain restrictions and rules apply. Employers should consult with a tax professional or visit the IRS website to ensure they are properly calculating their ERTC qualified wages.

Do owner’s wages qualify for the employee retention credit?

In most cases, owners' wages do not qualify for the Employee Retention Credit (ERC). The ERC is generally limited to wages paid to employees who are not owners of the business. However, there are some exceptions to this rule. For example, if the owner is also an employee of the business and is paid wages subject to payroll taxes, those wages may be eligible for the ERC. Additionally, if the owner is not an employee of the business but receives guaranteed payments from the business, those payments may also be eligible for the ERC. It's important to consult with a tax professional to determine whether owner's wages qualify for the ERC in your specific situation.

Page updated

Google Sites

Report abuse