The ERC calculation is based on total qualified salaries, including health plan expenses paid by the employer to the employee. 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. This law increased the employee limit to 500 to determine what salaries are applicable to the credit. 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.
Keep in mind that an eligible employer receiving these grants must keep records that justify where the funds were used. Business owners who weren't recovering startups weren't eligible for the employee retention credit for wages paid after September 31. 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. The Employee Retention Credit (ERC) was authorized under the CARES Act and encourages companies to keep employees on the payroll.
This law allowed some employers most affected by financial difficulties to be able to claim the credit against the qualified salaries of all their employees, rather than just those who did not provide services. The notice includes guidance on how employers who received a PPP loan can retroactively apply for the employee retention tax 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. The purpose of the ERC was to encourage employers to keep employees on the payroll even if they weren't working during the period covered due to the effects of the coronavirus outbreak.
Also, remember that if a customer has applied for a PPP loan and will be forgiven for it, they can now be eligible for the employee retention credit with certain salaries. They can file a Form 941X (adjusted quarterly federal tax return or employer refund request) up to three years after filing or two years after payment, whichever comes later. 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. Employers who use a Professional Employers Organization (PEO) or a Certified Professional Employer Organization (CPEO) do not file an individual 941 on their behalf, so it's important that they understand how they would reconcile this information and receive credit.