How can the Employee Retention Tax Credit Directly Impact Your Business?
The Employee Retention Tax Credit is hugely impactful for small and large businesses alike. This program gives money back to employers who struggled during the pandemic in 2020 and 2021. Each employer must meet a certain set of qualifications in order to receive the credit but if qualified, this can be extremely impacted for businesses who suffered during COVID. Keep reading to find out if your business qualifies and if you are eligible for money back!
What is the Employee Retention Tax Credit?
The Employee Retention Tax Credit is a great opportunity for any business knocked down during COVID to get back on their feet. This program incentivizes small businesses with a refundable tax credit for employees that stayed on their payroll in 2020 and 2021. This incentive was introduced in conjunction with CoronaVirus Aid and the CARES act in order to help small businesses that may have struggled during this time.
The Employee Retention Tax Credit rewards employers who can retain employees for a certain amount of time. As of 2020, the credit issued for this is 50% of up to 10,000 dollars. This money will be paid back to the business.
The reimbursement percentage since then has increased to 70% in 2021 meaning business owners can get even more back. Additionally, businesses that were initially qualified for $10,000 per year are now qualified for $10,000 per quarter. This amount of money can be extremely impactful for a business that struggled during the pandemic.
However, certain qualifications must be met in order to receive this credit. Businesses that are eligible include those who were fully or partially suspended due to COVID-19. Businesses whose gross receipts declined by more than 50% are also eligible for this credit.
What Employers Qualify for the Employee Retention Act?
Any tax exempt organization or business that was operating during any quarter of 2020 or 2021 qualifies for this credit. Government employees and those who are self employed will not qualify for this. There are a few more specifications. These businesses must have:
-been partially of fully suspended from operating in 2020 or 2021
-had significant decline in gross receipts during 2020 or 2021
A business’ operations must have been “partially suspended” due to COVID-19 in order to qualify for the employee retention tax credit. This includes being limited due to local, state or federal decree that impacted the employer’s operations.
This can range from in store hours being limited and employees not being able to work remotely to a restaurant only being allowed to offer carry out due to restrictions. Any operation that was stunted during the pandemic and could not function as normal qualifies for this tax credit.
What are Eligible Wages Under the Employee Retention Tax Credit?
Wages that are eligible under the employee retention tax credit for a small business include all wages and insurance/health benefits the employee received. If a business is big and operates on a larger scale, the only eligible wages are insurance and health benefits paid out to employees. Additionally, these credits cannot be paid out if your employees were providing services surrounding the effects of the pandemic.
Am I a Small or Large Employer, and How Do I Make that Determination?
Companies that are qualified as a small business as of 2021 or a small employer will have 500 or fewer full time employees. Any business with more than 500 employees is considered a big company and will only be eligible for wages based on health insurance and benefits paid out Journey Payroll is here to help your company thrive!
COVID-19 had an astronomical impact on the economy and especially on small businesses. Journey Payroll is here to help get you back on track with our variety of services including payroll, HR, onboarding and more. Contact us today to learn more about what we offer and to find out what we can do for you. We can’t wait to work with you!