Your Business Could Qualify for the Lucrative Employee Retention Tax Credit: Find out how
The employee retention credit may seem like a lost opportunity to some, but I am glad to let you know that you can still claim it. How? That’s the question lingering in many business owners’ minds. Or, some of you may not have been interested in this at all, which is why I am writing this article – to explain why it should be of interest. Read along to make sure that you know if your business is eligible for this credit.
Employee retention credit eligibility
The employee retention credit is a refundable credit that businesses could or can claim on qualified wages. This also includes certain health insurance costs, paid to employees during the pandemic. I will explain below the timeframes which are eligible for this credit.
This tax credit covers all business types or employers, regardless of the size or number of people they employ. This includes those who received the paycheck protection program (PPP) loans. The PPP loans were meant to help businesses keep employees on the payroll, receiving suitable wages during the pandemic. So, the fact that a business received the PPP loan does not disqualify it from receiving the employee retention credit.
Nevertheless, employers can claim a credit against qualified wages paid if they were ordered to fully or partially shut down or if their gross receipts fell below 50% for the same quarter in 2019 (for 2020) and below 80% (for 2021). The wages covered by this credit are those paid to employees retained between March 2020 and December 2021. However, you should approach a tax professional like me to get more clarification about wages paid after September 2021. To talk to me, click THIS LINK and go to, “Want Me To File Your Taxes?”
Therefore, if your business experienced any of the above, and you kept your employees on the payroll, you may be eligible for this credit. It is lucrative, as you will see in the paragraphs below. It’s worth thousands of dollars, yet, many small business owners were not sure how to claim it. And, since the pandemic is over and many people have moved on from it, it is easy to forget about claiming it. But I come bearing some excellent news!
When can you apply for the employee retention credit?
Even though you did not apply for the employee retention credit, here is an opportunity to claim it. You don’t have to remember the details and procedures because a tax professional like me is willing to help you claim your money.
Employers can claim this credit in retrospect until 2024. This means that your businesses can retroactively claim the credit in 2022, and I am right here to help you all the way.
However, even though I mentioned that you can claim the employee retention tax credit retroactively in 2022, it does not mean that 2022 wages qualify. Please seek guidance or hire a tax pro before committing a mistake. And, from what I always teach my clients and audience, one mistake on your tax return could open a can of worms because it can easily lead the IRS into wondering about other mistakes you may have committed. Once they do that, they may scrutinize your past returns and pull out some buried issues that can get you in trouble.
Therefore, all you have is the fact that you have until 2024 to look back on your payroll during the pandemic and retroactively claim the credit by filing an amended tax return.
Please note that I have been talking about other amended returns in the past few days. These were for something else that you can read in this article. In fact, they are about your improperly forgiven PPP loans.
But, in this case, I am talking about amending your returns so you can claim the employee retention credit in retrospect. But if the above issue of improperly forgiven PP loans also affects you, you can fix both issues in your amended return.
If you have already amended your return to fix the PPP loan issue and discover that you can also claim the employee retention credit, you can also amend it again. The IRS does not force you to amend your federal returns once.
Besides filing amended returns, you can report your total qualified wages, as well as the related health insurance costs, on your quarterly tax returns (Form 941 for most employers). Remember, you will be doing this in retrospect. By doing this, your refundable credit will be taken against your share of Social Security tax. Contact me as soon as possible to get further explanations on this and to hire me to file your quarterly taxes.
How much is the employee retention credit worth?
This credit came to force when Trump was still president. But it was extended by Biden, and obviously, the two administrations had varying views about the amount of the tax credit per retained employee.
This credit was initially introduced in 2020. It was worth 50% of qualified employee wages. However, there was an upper limit of $10,000 for any one retained employee for the covered period. This period was initially the years 2020 to 2021. This, therefore, granted a maximum credit of $5,000 for wages paid from March 13, 2020, to December 31, 2020.
The same was supposed to apply for the year 2021. However, The Consolidated Appropriations Act of 2021 extended the credit to include wages paid before July 1, 2021. It expanded the maximum credit to $7,000 per employee per quarter.
As such, you have two different figures for the two years in question. If your business did retain employees and meet the eligibility criteria, you should have claimed. I already mentioned the eligibility criteria above.
If you did not claim it, you should immediately file amended returns to claim your thousands. Your business could get tens of thousands worth of this employee retention credit, and it is refundable!
Contact my team now to book an appointment with me. We need to file your amended return as soon as possible. Your business can use some extra cash as we approach the holidays!!
Frequently Asked Questions
- How do you claim the employee retention credit?
To claim the employee retention credit, you simply need to file an amended return. According to the IRS, you only have until three years from the date of originally filing the return you are amending to file an amended return. Or, you can claim this when you file quarterly returns.
- Who can use the employee retention credit?
All employers are eligible for the employee retention credit – as long as they meet the eligibility criteria, which is: they were ordered to fully or partially shut down or if their gross receipts fell below 50% for the same quarter in 2019 (for 2020) and below 80% (for 2021) but kept paying employees.
- What is the employee retention credit?
This is a credit paid to employers who faced difficulties due to the pandemic, resulting in a loss of revenue. This credit is paid per retained employee during these difficulties. It was meant to encourage businesses to keep their doors open and employ people.
