The Employee Retention Credit (ERC) continues to provide opportunities for businesses and employers to lower their income tax liabilities, allowing companies to save thousands or even millions of dollars to bolster their working capital, embark on improvements including renovations, technology and staffing, business acquisitions, paying off existing loans etc.

Although the Employee Retention Credit (ERC) provisions expired at the end of 2021, the credit can be claimed retroactively on an un-filed or amended payroll tax returns as long as the statute of limitations remains open.

Generally, form 941-X must be filed by the later of: 3 years from the date you filed your original return, or 2 years from the date you paid the tax.

The CARES Act provides for an employee retention credit for eligible employers, including tax-exempt organizations, that pay qualified wages, including certain health plan expenses, to some or all employees during calendar year 2020 and 2021

For 2020, the Employee Retention Credit (ERC) is a tax credit against certain payroll taxes, including an employer’s share of social security taxes for wages paid between March 12, 2020 through December 31, 2020. The tax credit is 50% of the wages paid up to $10,000 per employee, capped at $5,000 per employee

For 2021, the employee retention credit (ERC) is a quarterly tax credit against the employer’s share of certain payroll taxes. The tax credit is 70% of the first $10,000 in wages per employee for the first (1st), second (2nd) and third (3rd) calendar quarters of 2021. That means the credit is worth up to $7,000 per quarter and up to $21,000 per year, for each employee.

Due to the termination of the employee retention credit for wages paid in the fourth (4th) calendar quarter of 2021, employers that are not recovery startup businesses are not entitled to the employee retention credit for wages paid on or after fourth (4th) calendar quarter of 2021.

A recovery startup business is eligible for the employee retention credit for qualified wages paid in the third (3rd) and fourth (4th) calendar quarters of 2021.In the case of an eligible employer that is a recovery startup business, the amount of the credit allowed for each of the third and fourth calendar quarters of 2021 cannot exceed $50,000.

An eligible employer may file a claim for refund or make an interest-free adjustment by filing Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, for a past calendar quarter to claim the employee retention credit to which it was entitled on qualified wages paid in that past calendar quarter.

Reminder: Section 280C(a) of the Code generally disallows a deduction for

the portion of wages or salaries paid or incurred equal to the sum of certain credits determined for the taxable year. Eligible employers are entitled to claim the employee retention credit after these qualified wages are reduced by any wages claimed for following programs:

• PPP loan, Qualified Sick Leave Wages and Qualified Family Leave Wages,
• Shuttered Venue Operators grant and Restaurant Revitalization Grant,
• Work Opportunity Credit,
• Credit for Increasing Research Activities,
• Indian Employment Credit,
• Wage Credit for Employees Who Are Active Duty Members Of The Uniformed Services,
• Paid Sick Leave, and
• Employer Tax Credit for FICA Paid on Tip Income.

If you filed Form 941-X to claim the Employee Retention Credit, you must reduce your deduction for wages by the amount of the credit, and you may need to amend your income tax return (e.g., Forms 1040, 1065, 1120, etc.) to reflect that reduced deduction.

The ERC has been amended on three separate occasions after it was originally enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March of 2020 by the

• Taxpayer Certainty and Disaster Relief Act of 2020 (Relief Act),
• the American Rescue Plan (ARPA) Act of 2021, and
• the Infrastructure Investment and Jobs Act (IIJA).

Following is a summary of the rule for Each Time Period (Click on the links below to read more):

1. CARES Act of March 2020 – Applies to Second(2nd), Third(3rd), and Fourth(4th) Calendar Qtrs. of 2020
2. Relief Act of 2021 – Applies to First (1st) and Second(2nd) Calendar Qtrs. of 2021
3. American Rescue Plan Act of 2021 – Applies to Third (3rd) and Fourth (4th) Calendar Qtrs. of 2021
4. Infrastructure Investment and Jobs Act (IIJA) -Applies to Fourth (4th ) Calendar Qtr. of 2021
5. What sets you apart from the other ERC Service Providers?
6. What’s your process in recovering the credit ?

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Contact us today to see if your business qualifies for the employee retention credit.

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