If you’re a business that’s survived the pandemic, you’ll know just how tough it was to keep your employees at work. Government restrictions and lockdowns have taken their toll on many businesses, and it’s been a huge struggle to keep going, sometimes not making the profits that you need to grow your business as intended.
But there’s good news! The IRS launched a scheme named Employee Retention Tax Credits to help you claw back some of that missing money and get back on track.
The Employee Retention Tax Credit is a scheme that was launched in March 2020 specifically to help struggling businesses keep their employees. While some businesses may have struggled due to forced closures, they still had staff to pay and it was a difficult decision to make – whether to continue paying them and drain the profits of the business or let them go, in the hope that recruitment and training costs wouldn’t eat up that same amount of money later.
Well, if you’re one of the businesses that kept your, employees, on the books, then you made the right decision. ERTC is a credit that the IRS will pay you to reimburse you for a portion of those wages that you paid out – as a sort of reward for keeping those staff in jobs.
The ERTC is open to small to medium businesses with fewer than 500 employees.
To qualify, each business must show that they are suffered a financial loss due to the pandemic. This could be in the form of bank statements or previous tax filings. If the business has lost more than 20% of its expected earnings throughout the pandemic, then it should qualify.
If the business launched during the pandemic, there’s even a chance for them to qualify by showing business projections and plans against the actual total profits.
The businesses will also need to prove that they have retained their full workforce during the pandemic. The whole idea is to reward those businesses that helped people to stay at work, so if you let a bunch of your staff go, then you may not qualify – or at least won’t qualify at all for the ones that are no longer with you.
In 2020, the total you could qualify for was up to 50% of each employee’s wage. However, due to increased restrictions, later on, the 2021 total to claim increased to 70% of each employee’s wages per quarter.
There was a cap placed on this at $7,000 per quarter per employee, making it a total of $28,000 per year for each employee that remained with the business throughout Covid – so that $28,000 is possible for each employee per year.
You can file for ERTC using your normal federal tax return and declaration. There are also several forms to use if you’re aiming to claim retroactively.
Although the scheme ended in September 2021 when the restrictions were lifted, it’s still possible to claim right up until the end of next year if you haven’t managed to file all of your taxes, or if you weren’t aware of the scheme.
If you’re unsure, there are several companies out there that specialize in understanding the ins and outs of ERTC. Professionals such as ERC Benefits can help you out by providing proof and filing correctly to avoid mistakes.
Once you’ve filed your claim, it can take anything between 6 and 10 weeks to actually receive your check. But it’s worth the wait. Once you’ve been approved, you’ll be able to use the reimbursed money to get your business moving and repair any damage made over the last 2 years.