If your business did not apply for Employee Retention Tax Credit, there is still time to do that. COVID-19 upended many businesses, and the CARES Act provided many different tools and sources and funding for boosting and supporting businesses that were impacted by COVID. One of the most overlooked benefit provided by CARES act is Employee Retention Credit. First, its is a misnomer, most people dismiss this because they believe that this “credit” may only reimburse taxes that were paid as part of payroll taxes, and if you either didn’t pay them, or only paid a small amount of money, then going back a year or two to claim taxes is just not worth it. We also find that many CPAs that service small businesses have been actively discouraging their clients from applying for it. This post will dispel some of the myths around ERTC.
- ERTC is NOT limited to taxes you paid. In fact, it will reimburse the business upto 70% of eligible wages paid (capped at 10,000 per employee per quarter for 2021) from January 2021 to September 2021 and 50% of eligible wages paid from March 13 to December 31, 2020
- This calculation is based on eligible wages, not employment taxes paid, but it is reported on form 940 (or 940X)
- Since almost no one pays 70% of wages as taxes, those calculations then result in a “over-payment” to IRS after credits are applied.
- If your business was impacted by COVID-19, and you fill the 940 (940X, if a 940 was already filed) correctly, IRS will send you a check for money that never actually paid.
- So, like PPP, ERTC ends up working more like a grant, which has some basic requirements, but unlike PPP, it pays you a lot more money per employee for a much longer period.
Small businesses with 10 employees can still qualify for hundreds of thousands of dollars in aid, depending on how they were impacted by COVID-19. If you haven’t yet claimed this credit, and your business was impacted by COVID-19, and you have W-2 employees, contact our lawfirm for assistance.