How Business Owners Can Benefit from Employee Retention Credits Amidst Pandemic Woes
Businesses were certainly not an exception to the woes of the pandemic. Despite the harsh environment businesses now find themselves in, the federal government has ensured that the effects of the pandemic are being mitigated. An employee retention credit (ERC) is a tax credit with the explicit goal of encouraging businesses to keep employees on payroll despite the pandemic. While this program was discontinued in 2021, its invaluable benefits may still be reaped by business owners. Because ERC’s are tax credits, you can claim them for the tax years of 2020 and 2021 to earn compensation retroactively.
Fortunately, a plethora of businesses can prove themselves to be eligible for ERC’s. The primary requirement is that the business must operate within the U.S. Aside from that, you must proven the effects the pandemic and/or lockdown has had on the business. One way to do this is by comparing gross receipts between 2019 and 2020/2021. Another way to prove is by showing the services that have been disrupted or suspended as a result of the COVID pandemic. Finally, if you qualify for the Recovery Startup Business program in the third or fourth quarter of 2021, you are eligible for ERC’s.
In total, it is possible to see around $26,000 in compensation for March 12th to December 31st, 2020, and for three quarters of 2021. The way this credit works is based on the number of full-time employees a business has. The two critical targets are 100 and 500 employees. For example, if you had less than the target number of full-time employees, you earn a credit which relates to the wages of both working and non-working employees. However, if you are above the target number, you earn a credit based on employees who are not working.
With this level of convulsion and intricacy, it is understandable business owners may have a difficult time claiming these credits. Because the brutal pandemic has created a harsh reality for many businesses, it is not uncommon that businesses would need this compensation to continue business operations. Seeing this need, some businesses offer services aimed at business owners to more easily facilitate the claiming of ERC’s. Credit League, for instance, has dedicated CPA’s and attorneys to handle the entire process, even providing a 5-minute quiz to pre-screen for eligibility. Ultimately, the ERC’s are such a valuable tool for businesses that have been struggling from the pandemic. With the lingering economic effects of COVID, having ERC's has proven to be an effective way of getting businesses back on track.
