Is employee retention credit tax exempt?

Yes, organizations described in section 501 (c) of the Internal Revenue Code (the “Code”) and exempt from taxes under section 501 (a) of the Code, may be eligible employers for the purposes of the employee retention credit if they are employers who otherwise qualify for the credit. If your company qualifies, you can apply for the FFCRA credit and the ERC credit for your retirement plans. As a result, under section 2301 (e) of the CARES Act, the employee retention credit is subject to a similar denial of deduction, including eligible health plan costs, in the amount of the employee retention credit. For more information on how to apply for the refundable employee retention credit, see How to apply for the employee retention credit.

It now appears that, according to the most recent IRS guidelines, the employee retention credit should be recorded on Form 1120-S, line 13g, Annex K and Form 5884. For more information, see Determining which employers are eligible to apply for the employee retention credit. The employee retention credit is equivalent to 50 percent of the qualifying wages (including qualifying health plan expenses) that an eligible employer pays in a calendar quarter. Disaster loan counselors can help your business with the complex and confusing employee retention credit (ERC) and employee retention tax credit (ERTC) program. Applying for the employee retention credit is easy and requires only a few simple steps to receive the refund.

The employee retention credit is a fully refundable tax credit for employers that is equivalent to 50 percent of qualified wages (including allocable qualified health plan expenses) that eligible employers pay to their employees. FAQ 86 states that employers who receive a tax credit for eligible wages and health care expenses do not include the credit in their gross income for federal income tax. The employee retention credit under the CARES Act encourages companies to keep employees on their payroll. You don't enter the credit that reduces applicable labor taxes to the employer or include the refundable part of the credit.

The Infrastructure Investment and Employment Act significantly modified the employee retention credit. Schedule your free consultation on the Employee Retention Credit (ERC) to see how much your company qualifies for. For more information and examples, see Determining the maximum amount of an eligible employer's employee retention credit.

Denise Lefler
Denise Lefler

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