With the tax filing deadline approaching, make sure your company is getting all the assistance available from government programs. That means checking that you’ve fully utilized the Employee Retention Credit, the refundable tax credit designed to make it easier for businesses to keep employees on the payroll, Inc. reports.
The credit is getting extended as part of the American Rescue Plan Act, the $1.9 trillion relief package just signed by President Joe Biden. Originally scheduled to end June 30, ERC will continue through the end of the year.
PPP recipients can file amended tax returns to claim the ERC for 2020 and/or claim an ERC in their 2021 tax filing. A company’s headcount doesn’t affect eligibility for the credit, but the size of a business dictates which wages can be claimed.
How the credit works, depending on the timeframe:
• First half of 2021: Eligible employers can claim a refundable credit against the employer share of Social Security tax equal to 70% of a full-time employee’s qualified wages paid, including certain health plan expenses. from Jan. 1 through June 30, 2021. The maximum ERC amount available is $7,000 per employee per quarter or $14,000 for eligible wages paid in the first half of 2021.
• Second half of 2021: The new law allows businesses to claim the refundable credit against the employer share of employment taxes (including Medicare) equal to as much as $7,000 per full-time employee per quarter during the last half of the year. So, including the existing provisions, business owners this year would qualify for up to $28,000 per employee.
• Full year, 2020: Employers can also qualify for a look-back to 2020 to access an additional credit per full-time employee. To access the 2020 credit, which spans March 12, 2020, through January 1, 2021, eligible companies must show a more than 50% decline in quarterly gross receipts, compared with the same quarter in 2019. The credit is 50% of qualified wages paid, up to $10,000 per employee in 2020. The maximum credit available is $5,000 per employee.