Otherwise, determine if you qualify based on the suspension of operations test or on the alternatives mentioned in the section “Am I eligible? section. The IRS has protective measures to prevent wage increases from being counted for the credit once the employer is eligible to receive the employee retention tax credit. Eligible employers can still apply for the ERC for previous quarters by filing the appropriate adjusted employment tax return within the deadline set out in the instructions on the corresponding form. Eligible employers, including PPP beneficiaries, can apply for a credit against 70% of qualified wages paid.
Employers with 100 or fewer full-time employees can use all the salaries of employees who work, as well as any paid time that they are not working, with the exception of paid vacation provided under the Families First Coronavirus Response Act. The requirement for the fourth calendar quarter that a recovering startup company should not be an eligible employer due to a total or partial suspension of its operations or a decrease in gross revenues was eliminated. Previously, the Consolidated Appropriations Act expanded the requirements to include companies that applied for a loan under the Paycheck Protection Program (PPP), including borrowers from the initial round of the PPP who were not originally eligible to apply for the tax credit. Companies can no longer pay salaries to apply for the employee retention tax credit, but they have until 2024 and, in some cases, 2025, to analyze their payrolls during the pandemic and apply for the credit retroactively by filing an amended tax return.
Consequently, it is important to ensure that all eligible expenses, including non-payroll costs, such as utility, rent and operating expenses, to name a few, are included in PPP loan forgiveness requests in order to maximize the qualifying salaries available to the ERTC. The amount of eligible salaries depends largely on how the qualifying salaries were reflected in the PPP loan forgiveness application. Also, remember that if a customer has applied for a PPP loan and will be forgiven for it, they may now be eligible for the retention credit for employees with certain salaries. The federal government established the Employee Retention Credit (ERC) to provide a refundable employment tax credit to help businesses cover the cost of keeping staff employed.
This law increased the employee limit to 500 to determine what salaries are applicable to the credit. While the Employee Retention Tax Credit (ERTC) program has officially expired, this does not affect a company's ability to apply for the ERTC retroactively. Keep in mind that an eligible employer receiving these grants must keep records that justify where the funds were used. Most employers, including colleges, universities, hospitals and 501 (c) organizations after the enactment of the United States Rescue Plan Act, could be eligible for credit.