Because Covid-19 negatively affects many businesses globally, there are several payroll tax credits that help employers out. One option for many employers is the ERC (employee retention credit). You may click here to learn more about ERC services and how they can help you as an employer.
What ERC Is
Your business may claim refundable credits for some health insurance costs. Under the Cares Act 2020, all eligible employers may claim about 50% of qualified wages of around $5,000 or $7,000 per worker.
You have a chance to claim this kind of credit for wages paid. Even when you claimed PPP loans before, you may still claim ERC.
How It Works
ERC is normally allowed against the employers’ share of social security tax. But the credit is completely refundable. This means in case the credit exceeds the total liability of the employer’s social security in the calendar quarter, the excess is regarded as overpayment and should be refunded.
As an employer, you may take advantage of advance payment by considering filling Form 7200 to get credits in excess. Usually, this is a similar form used to expedite the refund of FFCRA paid leave credit.
What Employers Can Qualify
Many employers, including hospitals, colleges, and organizations, qualify for this kind of credit. There are several factors every eligible worker should meet.
For instance, the company they work for must have temporary suspension or reduced orders because of government orders. Plus, the credit will only apply for a portion of the quarter but not for the whole quarter.
Companies can qualify even when they don’t meet the above criteria. If a company has a decline in gross receipt, it can still claim this credit.
Claiming ERC
There are no official application forms for ERC. Rather it is something you may claim when filing the federal tax turns with IRS. But specifically, you may need to claim the credit when filling out your IRS Form 941. All eligible entrepreneurs with small businesses may request an advance on the tax credit relief by completing an IRS Form 7200.
In case you are used to doing your business taxes, claiming ERC shouldn’t be an issue. Speaking with a tax advisor or CPA may help to simplify everything.
During those consultations, you can as well learn more about other tax benefits which you may claim. This may include the following:
- Different state or local business relief programs
- Amortization
- Depreciation
Importance of Employee Retention Credit
The ERC is not just an immediate type of credit. It is designed to reduce employment tax deposits of your business before filing quarterly employment tax returns.
The main benefit of employee return credit is the sizable sum employers won’t find necessary to pay in payroll taxes, thereby leading to extra liquidity, which may be used to keep their businesses afloat.
You may also use the credit to deal with the influx of increased demand now that individuals have been vaccinated.
The Takeaway!
With uncertainties affecting large and small businesses, the ERC is a perfect remedy against losses. The credit is designed to help you handle an influx of increased demands and other financial issues related to your employees. Just learn more about it so you may know how it works.
