What Is the ERC?
The ERC is a refundable payroll tax credit that the U.S. government instituted to help businesses retain employees during the pandemic.
“Refundable” means that the IRS will pay you back more in a refund than you paid in payroll taxes.
The ERC exists to help businesses and nonprofit organizations that experienced one of the following:
- A full or partial suspension of business operations, specifically as a result of a federal, state, or local government order during the COVID-19 pandemic.
- Suffered a “significant” decline in their gross receipts during the pandemic.
You calculate your ERC credit based on “qualified wages,” which includes employee benefit plans such as healthcare.
The government issues this credit based on a percentage of these qualified.
What is the maximum employee threshold in order to be eligible for the Employee Retention Credit?
To be eligible for ERC in 2020, employers must employ 100 or fewer full-time employees, even if the employee was working. The employee threshold was expanded under the amended law. To be an eligible for ERC in 2021, employers may employ 500 or fewer full-time employees, even if the employee was working.
This credit is equal to a percentage of qualified wages paid to employees by eligible employers, and can also include some health insurance costs.
- From March 12, 2020 to before January 1, 2021, employers could claim a refundable tax credit against 50 percent of qualified wages paid, up to $10,000 per eligible employee annually.
- The Consolidated Appropriations Act of 2021 extended the credit to wages paid after January 1, 2021, to before June 30, 2021, with some significant changes. Instead of up to $10,000 in wages per employee paid annually, this Act enabled qualified employers to claim a credit against 70 percent of qualified wages paid, with a credit of $10,000 per employee per quarter (for the first two quarters), as opposed to the previous amount of $10,000 per eligible employee annually.
- New legislation states that, for the third and fourth quarters of 2021 (wages paid after June 30, 2021, to before Jan. 1, 2022), employers can claim a refundable tax credit of up to 70 percent of the qualified wages paid to employees with a maximum credit of $7,000 per employee per quarter.
- The Act was sunset on September 30, 2021.
Does the ERC Affect Your Federal and State Income Taxes?
Unfortunately, yes. The ERC is effectively treated as taxable income because you must reduce the wage expense tax deduction for the amount of the ERC received. If you have already filed for Federal and State Tax.
Is It Too Late to Claim the ERC?
No. You can still claim the ERC through a retroactive filing of IRS Form 941-X. This is called the Adjusted Employer’s Quarterly Federal Tax Return, also known as the Claim for Refund. The statute of limitations for filing amended quarterly returns is generally three years from the date of filing the Form 941. For example, in order to apply for the Employee Retention Credit for the second quarter of 2020, the amended return needs to be submitted by July 2023.
Therefore, you should carefully consider the coming statute of limitations so you do not miss out on these refunds.
How long does it take to get my ERC Credit?
This is how the process works: you send us the required documents and we process an analysis at no charge. The process from start to finish usually happens in 1-2 weeks. If you wish to move -forward, you will select your desired payment option and we file your claim. Once filed, refunds are released based on IRS backlog. Currently, the IRS has stipulated a 12-20 week minimum turnaround on the ERC refunds.
Have a question for us?
Feel free to contact us if you have any more questions or concerns!
Email: Erccreditrefund@gmail.com
Phone: (951) 479-7422
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