As Main Street attempts to shake off the pandemic’s lingering financial malaise, most employers are struggling to keep their normal staffing complement employed full-time.
And while spending and growth numbers are surging, it’s hard to know how much of this upswing is artificially inflated, spurred by stimulus funding and other government intervention.
In addition, many businesses are still lagging in terms of patronage and earnings. And if you’re a business owner in this boat, pandemic fallout fears are a persistent issue that makes staffing concerns a huge source of anxiety.
To help take the pressure off small and medium-sized business owners and keep as many workers employed as possible, the federal government created the Employee Retention Credit (ERC).
So, what’s this latest tax concession all about? Let’s take a closer look at the ERC and see how it might benefit your business…
How Does The Employee Retention Credit (ERC) Work?
Originally created by the CARES Act, the ERC allows eligible employers to receive a refundable tax credit reimbursing up to 50% of employment taxes on “qualified employee wages” paid between March 12, 2020, and December 31, 2021.
However, the refundable amount is capped at $10,000 per employee and covers gross wages and some employer-sponsored health insurance costs.
And just to clarify, “qualified wages” refers to wages paid by businesses with up to 100 full-time employees (as of 2019) during the pandemic that were either forced to close are saw a significant drop in gross receipts.
ERC Updates Under The Recently Passed American Rescue Plan Act
While last year’s Disaster Relief Act extended ERC coverage to include the first two quarters of 2021, the American Rescue Recovery Plan extends coverage even further, encompassing all four quarters of 2021.
Additionally, the American Rescue Recovery Plan increases the wage cap to $28,000 per employee. And includes gross wages and some employer-sponsored health insurance costs.
Who Qualifies For The Employee Retention Credit?
Qualifying businesses include those with 100 or fewer full-time employees (based on average staffing levels for the 2019 fiscal year) that paid employee wages while being forced to shut down or that saw a significant drop in gross receipts during the pandemic.
Wondering If Your Business Can Take Advantage of The Employee Retention Credit?
If you own a small business that was forced to shut down or saw a significant drop in earnings during the pandemic, odds are you qualify. And if you have questions, I encourage you to get in touch for a FREE consultation.