Learn More About The Payroll Tax Refund Program Also Known As The Employee Retention Credit (ERC)
The federal government passed several relief bills in response to the pandemic and its severe impact on small businesses. Although most people are familiar with PPP loans, which were created by the CARES Act's $2 trillion, few know about the Employee Retention Credit (ERC), which was also established by the CARES Act. If you are a small or medium-sized business owner who retained your full-time or full-time equivalent W-2 employees on the payroll during COVID, you may be eligible for a payroll tax refund, which is the ERC. If you qualify, you could receive up to $26,000 per employee!
Unlike the Paycheck Protection Program (PPP), which ended in 2021, this opportunity is still available. Let's look into what this could mean for business owners and workers. The Employee Retention Credit (ERC) is the name given to it, and many business owners and their accountants are unaware of its existence, despite the fact that 70% to 80% of small and medium-sized businesses would be eligible for the refund.
The ERC allows qualifying businesses to claim a significant tax refund for every employee who remained on the payroll throughout the last three quarters of 2020 and the first three quarters of 2021. The ERC can be incredibly generous for those who meet the requirements. Eligible companies may claim a $5,000 tax refund for each employee who worked for them during the last three quarters of the 2020 calendar year.
The benefit for 2021 is even greater. Qualifying businesses are entitled to a $21,000 tax refund for each employee who worked for them during the first three quarters of the 2021 calendar year. This means that your business may be owed a total of $26,000 for each employee who worked during this 18-month period.
How Do I Apply for The Payroll Tax Refund (ERC) in 2023?
To file for the payroll tax refund, you must amend two years of previously filed forms with the IRS, which can be done using form 941-X. To complete this form accurately, you must report PPP info and eligible wages for each quarter of 2020 and 2021 on your federal employment tax returns. Furthermore, you must report any qualified sick leave and qualified family leave wages for which you are eligible for a credit under the Families First Coronavirus Response Act (FFCRA).
Many small businesses prefer to seek assistance with the claim process to ensure they are adhering to all rules and regulations, which will most likely save them a significant amount of time.
To ensure a precise calculation of your ERC tax credit, it is advisable to seek the assistance of a CPA who specializes in the ERC. Furthermore, be sure to file your claim before the deadline to maximize the benefits of the ERC tax credit.
If you have any doubts about your eligibility for the ERC tax credit, it's best to consult a ERC expert for proper guidance.