While COVID-19 has slipped from the minds of many, the impacts felt by businesses remain very real. It’s been a daunting few years for small businesses especially just to stay afloat.
Politicians haven’t provided all the answers for companies, but they’ve helped fill some of these gaps through legislation. Congress created the Employee Retention Tax Credit in March 2020 to reward small businesses for keeping their employees on the payroll. This had a twofold impact – allowing businesses to continue operating and allowing employees to keep collecting paychecks during hard financial times.
Unfortunately, the tax credit expired in 2021 but that doesn’t mean you can’t still take advantage. There’s still a way for you to amend your tax returns for 2020 and/or 2021 and get this credit for keeping your employees on board.
Who Qualifies?
Only certain small businesses that were operating in 2020/2021 will be eligible to amend their returns for the tax credit. Private businesses and nonprofits in those years may be eligible if:
- The government ordered at least a partial shutdown in either year
- Gross receipts for a single quarter in 2020 fell by 50% from the same quarter in 2019
- Gross receipts for a single quarter in 2021 fell by 20% from the same quarter in 2019 or 2020
You can claim this credit on each eligible quarter on Form 941. If an employer claimed the Work Opportunity Tax Credit or the employer credit for FMLA during that period then they cannot also claim the retention credit. A business that took out a PPP loan cannot claim the retention credit for the same wages unless there’s excess from what’s covered by PPP.
Once you’re able to prove any of those circumstances, you must determine which of your employees count towards the credit. Any businesses with 100 or fewer full-time employees will have all employees counted. Any business with more than 100 employees will only have those employees who are full-time and are being paid while not working due to shutdowns or a reduction in revenue.
How Much is the Credit Worth?
If your organization qualifies for the credit in 2021, you can receive a credit of up to $7,000 per employee (70% of qualified wages up to $10,000) per quarter for each quarter (up to $28,000 for the year per employee). If your organization qualifies for the credit in 2020, you can receive a credit of up to $5,000 for each eligible employee (50% of qualified wages up to $10,000) in 2020 as a whole.
If you qualify in 2021 and had 50 employees with each qualifying for the max credit in each quarter, you would have a $1,400,000 tax credit (50 employees times the $7,000 credit times four quarters).
Contact the Law Offices of Tyler Q. Dahl
You can’t afford to get this wrong for your business. The pandemic already dealt serious blows to your bottom line so don’t compound those issues by ending up in a fight with the IRS. We can help you properly claim this credit and get the money you deserve for fighting for your organization and your employees during this pandemic. Contact our team today and we’ll make sure you get the credit you deserve.
Dahl Law Group
Latest posts by Dahl Law Group (see all)
- How are California Law Corporations Taxed? - December 19, 2024
