The U.S. Congress approved more than $4 trillion in relief funds to respond to the COVID-19 pandemic. The government has only paid out $3.5 trillion.
The pandemic seems like several lifetimes ago, but there are some programs still in effect to help your business continue on the path toward recovery.
One of them is the Employee Retention Tax Credit. As with other programs designed to help businesses through a difficult time, it’s hard to understand the qualifications and how to claim credits.
Fortunately, you’re in an excellent place to learn about the Employee Retention Credit application so you can claim the funds you deserve.
Read on to find out how to navigate the tax credit application.
What Is the Employee Retention Tax Credit?
Let’s make sure you understand what you’re applying for and what the deadlines are. The Employee Retention Tax Credit was part of the CARES Act, passed in March 2020.
It allows small and mid-sized businesses to get up to 50% of $10,000 in wages paid to employees between March 13, 2020, and December 31, 2020. You may be eligible to claim wages paid up until September 30, 2021, or December 31, 2021.
The eligibility requirements changed over time with new laws and legislation. You might not have qualified when the program was originally rolled out.
However, thanks to some updates, you may qualify now. For instance, PPP loan recipients were originally excluded from this program. That changed later on, so even if you got a PPP loan, you can claim the tax credit.
There are two litmus tests to determine if you can take the tax credit or not. The first is if your business had to partially or completely shut down because of a COVID-19-related government order.
A partial shutdown means that you couldn’t travel or attend meetings because of shutdowns.
The second test is that the business had at least a 20% drop in revenue for a quarter in 2020 or 2021. This is compared to the same quarter in 2019.
Filling Out the ERTC Application
Are you ready to claim your credits? You can claim it on your annual tax returns. If you want to get tax credits faster, you can claim them when you file payroll taxes. Click here to learn how that works.
There isn’t a standard employee retention tax credit application, but a series of forms to fill out. The first is Form 941. You may use Form 7200 if you want an advance payment of the tax credit.
It’s so confusing that several companies formed to offer Employee Retention Credit services to help small businesses get the funds they are entitled to.
Figuring Out the Employee Retention Credit Application
It’s not too late to claim tax credits if your business suffered during the pandemic. The Employee Retention Credit Application consists of a few forms, as long as your business qualifies.
You’ll be able to get much-needed relief to continue to operate your business and pay employees.
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