FAQs
What is the Employee Retention Tax Credit (ERTC)?
The Employee Retention Tax Credit (ERTC) is a refundable tax credit designed to encourage businesses to retain their employees during times of financial hardship, such as the COVID-19 pandemic. Eligible employers can claim the credit on their federal employment tax returns, reducing their overall tax liability.
How is the credit calculated?
The ERTC calculation varies depending on the time period in which the wages were paid. For example, for 2020, the credit is equal to 50% of qualified wages paid, up to $10,000 per employee for the entire year. For 2021, the credit is equal to 70% of qualified wages paid, up to $10,000 per employee per quarter.
Can I claim the ERTC if I received a Paycheck Protection Program (PPP) loan?
Yes, but you cannot claim the ERTC on the same wages used for PPP loan forgiveness. Employers must ensure they are not "double-dipping" by using the same wages for both programs.
Can I still claim the ERTC for past quarters?
Yes, you can claim the ERTC retroactively by amending your federal employment tax returns for the relevant quarters using Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund.
What if my business started after February 15, 2020?
Businesses that started after February 15, 2020, are eligible for the ERTC, provided they meet the eligibility criteria related to government-mandated shutdowns or significant declines in gross receipts.
Can I claim the ERTC for employees who are family members?
In most cases, you cannot claim the ERTC for employees who are related to you. This includes immediate family members, such as children, siblings, and spouses, as well as certain relatives by marriage.
What if my business was not affected by a government order but still experienced a significant decline in gross receipts?
Your business can still qualify for the ERTC if it experienced a significant decline in gross receipts, even without a direct government order affecting your operations.
Can I claim the ERTC for employees who are on furlough or temporary leave?
Yes, as long as the employer continues to pay the employees' wages and qualified health plan expenses during the furlough or temporary leave period, these wages can be claimed for the ERTC.
Please note that this FAQ is for informational purposes only and should not be considered legal or financial advice. Always consult with a tax professional for guidance specific to your business circumstances. You can always contact us and the consultation is free of charge.
Who is eligible for the ERTC?
Eligible employers include businesses and tax-exempt organizations of all sizes that:
Experienced a full or partial suspension of operations due to a government order related to COVID-19, or
Suffered a significant decline in gross receipts during a calendar quarter compared to the same quarter in a previous year.
What are qualified wages?
Qualified wages include wages, compensation, and qualified health plan expenses paid by an eligible employer to its employees during the periods of business suspension or significant decline in gross receipts.
How do I claim the ERTC?
To claim the ERTC, eligible employers must report their total qualified wages and related health plan expenses on their federal employment tax returns (e.g., Form 941). Employers can also request an advance of the credit by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Is the ERTC available for 2022?
As of my knowledge cutoff date in September 2021, the ERTC was not extended for 2022. However, tax laws and regulations are subject to change, so it's essential to consult with a tax professional or check the IRS website for the most up-to-date information.
Are part-time employees eligible for the ERTC?
Yes, both full-time and part-time employees are eligible for the ERTC, as long as the employer meets the eligibility criteria for the credit.
How do I determine if I had a significant decline in gross receipts?
A significant decline in gross receipts occurs when an employer's gross receipts for a calendar quarter are less than 50% of the gross receipts for the same calendar quarter in 2019 (for 2020 eligibility) or less than 80% of the gross receipts for the same calendar quarter in 2019 (for 2021 eligibility).
Are self-employed individuals eligible for the ERTC?
Self-employed individuals are not eligible for the ERTC on their self-employment income. However, if they have employees and meet the eligibility criteria, they can claim the ERTC for their employees' qualified wages.
RESOURCES
Internal Revenue Service (IRS) - ERTC: The IRS is the primary source of information for U.S. tax-related matters. Their ERTC page provides detailed guidance, instructions, and updates related to the tax credit. Visit: https://www.irs.gov/coronavirus/employee-retention-credit
U.S. Department of the Treasury - ERTC: The Treasury Department also provides information about the ERTC, including fact sheets, FAQs, and updates on any changes in legislation. Visit: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses
Small Business Administration (SBA): While the SBA mainly focuses on loans and grants, they also provide general guidance for small businesses on various relief programs, including the ERTC. Visit: https://www.sba.gov/
Tax Professional Associations: The American Institute of Certified Public Accountants (AICPA) and the National Association of Enrolled Agents (NAEA) provide resources and guidance on various tax-related topics, including the ERTC. Visit: https://www.aicpa.org/ and https://www.naea.org/
Tax Software Providers: Many tax software providers, such as TurboTax, H&R Block, and TaxAct, offer guidance and support on tax credits, including the ERTC. They usually provide articles, FAQs, and sometimes even video tutorials to help users navigate the tax credit process. Visit their respective websites and search for "ERTC" or "Employee Retention Tax Credit."
You can always contact us and receive a consultation free of charge.