Before we get into qualifying and applying for ERTC, here is a brief background as to how it came into existence.
If you wish to skip the background, jump forward to ERTC Tax Credit Eligibility.
In 2020, the CARES Act created the ERTC tax credit program.
This program enabled eligible businesses and employers to claim a credit against 50% of qualified wages paid.
The maximum credit amount per employee in 2020 was up to $10,000 paid annually from March 13 to December 30, 2021.
Consolidated Appropriations Act
Initially, businesses could either take a loan from Paycheck Protection Program (PPP) or claim credit from ERTC.
However, in 2021, the Consolidated Appropriations Act changed this rule.
Now, medium to small-sized businesses could benefit from ERTC, even if they had taken a PPP loan.
The program was also extended to early 2021, and the qualified wages for the credit per employee was $10,000 per quarter.
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American Rescue Plan (ARP)
In 2021, the American Rescue Plan extended the ERTC tax credit to the end of 2021.
The credit limit was still the same, 70% of qualified wages with a limit of up to $10,000 per quarter.
This means that an employer could claim $7,000 per quarter per employee.
Infrastructure and Investment Jobs Act
On November 15, 2021, the Infrastructure and Investment Jobs Act was signed, and the ERTC program’s end date was changed from December 2021 to September 2021.
This means the wages paid after September 30th will not be considered eligible for ERTC tax credit.
However, this doesn’t mean the companies can’t still claim the credit. For instance, Recovery Startup
Businesses are qualified to claim ERTC till the end of 2021 if they had an average of $1 million or less in gross receipts.
What Wages Qualify For Credit?
To understand qualified wages, you first need to determine if your business is large or small, and this is calculated by the number of employees.
For the 2020 ERTC tax credit claim, an employer is deemed a small employer if they have an average of 100 employees or less in 2019
In order to get the 2021 ERTC tax credit claim, an employer is deemed a small employer if they have an average of 500 employees or less in 2019.
For employers that are not considered small employers, the eligible wages include all wages paid when the business was suspended or faced a decline in gross receipt and is not providing any services and health insurance benefits up to $10,000 per employee.
For small employers, qualified wages include all wages and health insurance benefits paid to an employee when the employer is considered an eligible employer during the COVID-19 pandemic;
whether the business faced a decline in gross receipts or partial/full suspension due to government orders. It doesn’t matter if the employee is working or not.
Eligible wages can only be calculated if the employer is eligible.
If not, the employer can no longer claim credit for such wages.
Claiming the ERTC tax credit is not as simple as it seems.
There is a lot of paperwork involved and eligibilities to meet.
Thus, working with a professional CPA firm is recommended to help you maximize your ERTC refundable credits for small to medium-sized businesses.
The ERTC Tax Credit Eligibility Process
The Employee Retention Tax Credit or ERTC was formed to help small businesses that were struggling financially.
Since its implementation in the year 2020, the program went through multiple changes and was even terminated by the IRS for most businesses from September 30th, 2021.
However, the program’s termination doesn’t mean businesses can’t claim the ERTC.
Businesses that meet the eligibility criteria can still claim the ERTC.
ERTC is a refundable credit that encourages employers to keep their employees on the payroll during the COVID-19 pandemic.
Businesses can claim the ERTC by paying qualified wages to their employees, including specific health insurance costs paid to employees.
Private companies or tax-exempt organizations that actively traded from 2020 to 2021 are eligible for the ERTC tax credit.
There are other eligibility requirements that a company has to meet to claim the tax credit.
The first is the government order test.
During the COVID-19 pandemic, if a business had to fully or partially suspend their trade or business hours due to government orders, such as limiting meetings, travel, etc., they are eligible for a tax credit.
In 2020, if an employer faces a gross receipt decline of 50% in a calendar quarter compared to the same quarter in 2019, they are eligible for ERTC tax credit in 2021.
If an employer faces a gross receipt decline of 20% in a calendar quarter compared to the same quarter in 2019, they are eligible for ERTC tax credit.
If businesses were opened in 2020, the IRS allows them to use the gross receipts in the quarter the company started in to any quarter in 2021.
Let’s look at the requirements:
The trade or business started after February 15, 2020.
The business should not be eligible for the tests mentioned above, i.e. partial/full suspension and gross receipt decline. The annual gross receipts should not exceed $1 million.
Your business can still claim the ERTC tax credit. Businesses have a time frame of 3 years, from the program’s onset, i.e., Q3 of 2021, by determining if their paid wages after March 12, 2020, are eligible through the end of the program.
There are forms that you can file to claim the ERTC tax credit.
These are extensive and quite complicated to complete.
Don’t worry, we have a great solution for you.
The required forms include:
For a shortcut to the following steps go to the description and click the link https://ertctaxassistance.com/ertc-apply/
It is a much simpler alternative to the government forms.
Fill out the Pre-Qualification form and we will let you know your eligibility.
You can calculate the ERTC tax credit in 4 simple steps.
First, you need to determine what quarters of the calendar year 2020 and 2021 your business qualifies for an ERTC fund.
Next, you need to determine the total qualified wages paid to employees per quarter.
Once you calculate all the qualified wages paid to employees in 2020, apply a $10,000 cap per employee in all quarters combined.
Then, multiply the qualified wages with the annual cap by 50% to determine your tax credit amount for 2020.
For 2021, calculate the qualified wages paid to each employee in Q1, Q2, and Q3 (since the program was reduced to September 30, 2021).
Apply a cap of $10,000 per employee across all quarters, and multiply the qualified wages up to the quarterly cap by 70% to determine your tax credit amount for 2021.
For a much simpler solution you can go to the description down below and click on the link https://ertctaxassistance.com/ertc-apply/
Then fill out a free and quick 10 field simple pre-qualification form.
The ERTC fund experts will review the information.
They will let you know what options are available to you and what steps to take from there.
They will help you claim your ERTC tax credit in 5 simple steps.
All you have to do is:
Fill out the questionnaire, Upload documents, Calculate credit, File payroll returns and receive your business credit.
We feel confident that this method will get you the most accurate and quickest return possible.
We wish your business great success in the years to come.