ERC Qualified Wages; not PPP, free government money extended 'till April 2025 (US only)
US BUSINESS OWNERS ONLY; ERC Qualified Wages; free government money even if you got the COVID Paycheck Protection Program (PPP) last year
The deadline has been extended to April 15, 2024, while 2021 amended returns for all quarters are due by April 15, 2025.
The Employee Retention Tax Credit (ERTC) and the Paycheck Protection Program (PPP) loan are both government programs designed to provide financial relief to businesses impacted by the COVID-19 pandemic.
However, they differ in several key ways.
First, the ERTC is a tax credit that can be claimed on qualified wages, including health insurance costs, paid to employees. The credit can be used to lower a business's federal tax bill or create a refund for the company. On the other hand, PPP loans are government loans that businesses can use to cover certain expenses, such as payroll and rent.
Second, the ERTC is available to all employers regardless of size, including tax-exempt organizations, except state and local governments and their instrumentalities and small businesses that take Small Business Loans. On the other hand, PPP loans are generally available only to small businesses.
Third, the ERTC is calculated based on the number of qualified wages paid by the employer, up to a maximum of $10,000 per employee per year. PPP loans are calculated based on the size of the business and the number of its payroll expenses.
Fourth, the ERTC can be claimed by the employer on their tax returns, while PPP loans need to be applied and approved, the loan needs to be used in a specific time frame, and a portion or all of the loan may be forgivable depending on the use of funds.
They differ in structure, eligibility, and usage; the ERTC and PPP loan are government programs that provide financial relief to businesses impacted by the COVID-19 pandemic.
Companies should consult a tax professional to determine which program is best for their situation.
When can you retroactively claim until?
Businesses can retroactively claim the Employee Retention Tax Credit (ERTC) until April 15, 2024, for the Q2, Q3, and Q4 of 2020 and until April 15, 2025, for all quarters of 2021.
This means businesses have a certain amount of time to reflect on their payroll during the pandemic and retroactively claim the credit by filing an amended tax return.
It's important to note that the program has sunset officially, and businesses can no longer pay wages to claim the credit.
Still, they have until the dates above to claim it retroactively.
Does it apply to me?
The Employee Retention Tax Credit (ERTC) is a tax benefit for companies that paid their employees while experiencing financial challenges due to shutdowns surrounding the COVID-19 pandemic.
The ERTC is available to all employers regardless of size, including tax-exempt organizations, except state and local governments and their instrumentalities and small businesses that take Small Business Loans.
To qualify for the ERTC, the employer must meet one of two alternative tests: either the employer's business is wholly or partially suspended by government order due to COVID-19 during the calendar quarter, or the employer's gross receipts were below 50% of the comparable quarter in 2019.
How much money will you get?
The Employee Retention Tax Credit (ERTC) amount is 50% of the qualifying wages paid up to $10,000 per employee annually for wages paid between March 13 and December 31, 2020.
For 2021, the credit is equal to 70% of the qualified wages paid, up to $10,000 per employee per quarter, with a maximum credit of $7,000 per employee per quarter for the first three quarters of 2021 for most businesses.
For Recovery Startup Businesses, the distinction is up to $50,000 for the third and fourth quarters of 2021.
It is important to note that the credit amount may vary depending on the quarter, whether the employer took a Paycheck Protection Program (PPP) loan, and when they claimed the credit.
It is also recommended to consult with your certified public accountant or attorney for specific advice.
Benefits:
The Employee Retention Tax Credit (ERTC) is a refundable tax credit for qualifying employee wages.
They are designed to encourage employers to keep employees on their payroll during the COVID-19 pandemic.
The credit is 50% of up to $10,000 in wages paid by an employer whose business is wholly or partially suspended because of COVID-19 or whose gross receipts decline by more than 50%.
Available to all employers regardless of size, including tax-exempt organizations, except state and local governments and their instrumentalities and small businesses who take Small Business Loans.
Employers must meet one of two alternative tests to qualify: either their business is wholly or partially suspended by government order due to COVID-19 during the calendar quarter, or the employer's gross receipts were below 50% of the comparable quarter in 2019.
The credit is effective for wages paid after March 13th and before December 31, 2020.
The definition of qualifying wages varies by whether an employer had, on average, more or less than 100 employees in 2019.
Employers can be immediately reimbursed for the credit by reducing the payroll taxes they have withheld from employees' wages that they must deposit with the Treasury.
The ERTC is different from the Paycheck Protection Program (PPP) loan as it is a credit, not a loan, and it does not have to be repaid, whereas PPP loans have to be repaid.
The Employee Retention Tax Credit (ERTC) is a refundable tax credit for businesses that have suffered financially due to the COVID-19 pandemic. It incentivizes employers to keep employees on their payroll and can be applied retroactively until April 15, 2024.
The credit can provide businesses with up to $7,000 per employee per quarter for the first three quarters of 2021, which equals a potential total of $21,000 per employee. Eligible employers can qualify for $5,000 per employee credit for all of 2020.
The ERTC differs from the PPP loan and is open to many employers, including private businesses, non-profits, educational institutions, and hospitals.