The employee retention credit (ERC) under the CARES Act is a great way for companies to keep their employees on the payroll during the COVID-19 pandemic. This refundable tax credit provides eligible employers, including PPP beneficiaries, with a credit against 70% of qualified wages paid. It is important to ensure that all eligible expenses, including non-payroll costs, such as utility, rent and operating expenses, are included in PPP loan forgiveness requests in order to maximize the qualifying salaries available to the ERTC. Additionally, special qualifications have been added for employers with severe financial difficulties or who are part of a recovering startup.
Although a large number of employers who were otherwise eligible for the ERC did not apply for the credit, they still have time to file amended payroll tax returns and take advantage of the ERC. To apply for credit for previous quarters, employers must file Form 941-X, Employer's Adjusted Quarterly Federal Tax Return or Request for Refund, for the applicable quarters in which qualifying wages were paid. It is recommended to work with a professional business tax firm to discuss your tax planning and filing strategy in relation to ERC and other issues related to COVID-19. People who have more than 100 full-time employees can only use the qualified salaries of employees who do not provide services due to the suspension or decline of business activity. The best way to determine if you meet the requirements is to work with a professional tax planning and advisory firm to address the complex changes introduced in the ERC requirements.
The ERC is an excellent way for businesses to receive financial relief during these difficult times. Companies should take full advantage of this program by relying on up-to-date technological solutions in combination with tax credit specialists who help employers identify if they are eligible, request the full amount of the credit and ensure proper payroll tracking and documentation.