Employee Retention Tax Credit eligibility updates: just the facts, please!

October 5, 2022

ERTC has been a point of discussion in many financial conversations since 2020, but with the plentiful changes this program has seen, the facts often get lost in the mix – so let’s get back to the facts.

If you’re a business owner, there’s a chance you’ve likely heard of one or all of the relief programs aimed at helping businesses, including the Employee Retention Tax Credit (ERTC). Created to provide business owners with provisions to help counteract losses in revenue (due to government restrictions and mandated shutdowns) this payroll tax credit has experienced many updates that could now make your business eligible.

Eligibility and qualified wages

Since ERTC was originally passed in March 2020, there has been multiple adjustments and changes made to the tax credit eligibility rules, therefore increasing the ERTC qualification pool to more businesses.

Some of the key indicators of whether a business qualifies for ERTC to some extent includes if the business was fully or partially shutdown due to government mandated restrictions, the business either experienced a 50% or more gross receipt decline in 2020 compared to 2019, experienced a 20% or more gross receipt decline in 2021 compared to 2019, or if the business was started in 2020/21.

ERTC eligible businesses could potentially receive up to 70% of the paid qualified wages and in 2021, through the Consolidated Appropriations Act (CAA) and the American Rescue Plan Act (ARPA), eligibility rules were expanded, increasing the number of qualified wages per quarter. Additionally, for businesses with 500 or less full-time employees all wages now qualify for ERTC. However, for businesses with over 500 employees, qualified wages may include wages for employees that did not render services; these eligible wages include employees sent home due to government restrictions or decline in business activity but still received benefits from the employer (such as insurance).

For wages already covered by the Paycheck Protection Program (PPP), the ERTC cannot be used. Additionally, wages covered under the Families First Coronavirus Relief Act (FFCRA) do not qualify for ERTC. However, using the previously mentioned credit does not necessarily disqualify you from participation, and you shouldn’t let this discourage you from claiming available programs.

ERTC guidance

To apply for the ERTC, eligible employers can report their qualified wages for the quarter on an amended  Form 941. It is recommended to have this done by a tax professional, so you don’t miss any important steps and lose out on the benefits.

For more information regarding ERTC and other government relief programs, contact Honkamp director of sales, Ben Yunt at bd@honkamp.com, call 888-556-0123 or visit this link to schedule a complimentary 15-minute meeting to get back to what you need most – just the facts.

This article was previously published in Franchising USA. 

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