How to Take Advantage of the ERC

As a business owner, you may be eligible to take advantage of the Employee Retention Tax Credit (ERC). This tax credit is designed to help employers offset the costs associated with keeping employees on the payroll during the COVID-19 pandemic. Read on to learn more about what this tax credit is, who is eligible, and how to take advantage of it.

What is the ERC?

The ERC is a refundable tax credit available to employers impacted by the COVID-19 pandemic. The tax credit is equal to 50% of qualified wages paid to employees between March 12, 2020, and December 31, 2020, up to $10,000 per employee. This means that employers can receive up to a $5,000 credit for each employee for wages paid between March 12, 2020, and December 31, 2020.

The ERC is a great way for employers to offset the costs associated with keeping employees on the payroll during the pandemic. It is important to note that the credit is only available to employers who have experienced a significant decline in gross receipts. Employers must have experienced either a 50% decline in gross receipts in a consecutive 3-month period in 2020 compared to the same 3-month period in 2019 or a 20% decline in gross receipts in any 2020 calendar quarter compared to the same quarter in 2019.

Who is Eligible for the ERC?

The ERC is available to employers of all sizes, including corporations, partnerships, sole proprietorships, and nonprofits. The tax credit is also available to employers who have received a Paycheck Protection Program (PPP) loan, as long as the employer is not using the ERC to offset wages that have already been covered by the PPP loan.

In order to be eligible for the ERC, employers must have experienced either a 50% decline in gross receipts in a consecutive 3-month period in 2020 compared to the same 3-month period in 2019 or a 20% decline in gross receipts in any 2020 calendar quarter compared to quarter in 2019. Employers must also have retained their employees and paid them wages in order to be eligible for the credit.

How to Claim the ERC

Claiming the ERC is a simple process. A employer can claim the tax credit by filing Form 941, Employer’s Quarterly Federal Tax Return, for the applicable quarter. Employers will also need to complete Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, to claim the credit. Employers can also claim the ERC on their annual federal income tax return.

It is important to note that employers must apply for the credit before filing their return because the credit is not refundable. This means that employers must reduce their federal income tax liability by the amount of the credit before filing their return.

Conclusion

The ERC is a great way for employers to offset the costs associated with keeping employees on their payroll during the COVID-19 pandemic. To take advantage of this tax credit, employers must have experienced either a 50% decline in gross receipts in a consecutive 3-month period in 2020 compared to the same 3-month period in 2019 or a 20% decline in gross receipts in any 2020 calendar quarter compared to the same quarter in 2019. Employers must also have retained their employees and paid them wages in order to be eligible for the credit. Claiming the ERC is a simple process and can be done by filing Form 941, Employer’s Quarterly Federal Tax Return, for the applicable quarter.

If you are an employer who has experienced a significant decline in gross receipts due to the COVID-19 pandemic, now is the time to take advantage of the ERC and offset the costs associated with keeping your employees on the payroll. Don’t miss out on this valuable opportunity to save money and reduce your federal income tax liability. Chiles Capital’s team of CPA’s and tax attorney’s can file your ERC and we have programs that can advance up to 85% of the total credit amount. Contact us today for a free Employee Retention Tax Credit consultation.