What is the deadline to claim the employee retention credit?
Since the COVID-19 pandemic started, many small to medium-sized businesses are navigating financial challenges to retain their employees. The Employee Retention Credit (ERC) was introduced as a lifeline for eligible small businesses to keep staff on payroll during these hard times.
But is there a deadline to claim this valuable refundable tax credit?
Very good news. There is still time. For all quarters in 2020, the deadline to apply for ERC is April 15th, 2024. For all quarters in 2021, the deadline to apply for ERC credit is April 15th, 2025.
If you have not already filed, you can still claim the employee retention credit retroactively in 2023, 2024, and 2025.
Key ERC Credit Takeaways You Will Learn:
- 2020 Application Deadline: Businesses can apply for ERC 2020 credits until April 15, 2024.
- 2021 Application Deadline: The deadline for ERC 2021 credits is April 15, 2025.
- IRS Processing Pause: The IRS has temporarily halted ERC claims processing due to misuse.
- Free ERC Consultation: Disaster Loan Advisors offer a free consultation to assess ERC eligibility.
- Potential Refund Amount: Businesses could claim up to $26,000 per employee in refunds.
See Important 2024 Employee Retention Tax Credit Deadline Information at the Bottom of This Article.
Find Out More About the Employee Retention Tax Credit (ERTC)
The Employee Retention Tax Credit (ERTC) is a refundable payroll tax credit designed to provide financial support to eligible employers who retained their employees during the COVID-19 pandemic.
ERTC Eligibility Criteria
1. The business must have operated during 2020 or 2021. Understanding the eligibility criteria for the Employee Retention Credit (ERC) is crucial for small to medium-sized business owners looking to claim this valuable tax incentive. Here is a comprehensive list of requirements that businesses must meet to qualify for the ERC:
2. The company experienced either a full or partial suspension of operations due to COVID-19 related government restrictions or a significant decline in gross receipts during any calendar quarter.
3. For 2020, a significant decline in gross receipts is defined as at least a 50% drop compared to the same quarter in 2019.
4. For 2021, a significant decline in gross receipts is defined as at least a 20% drop compared to the same fourth quarter as in 2019.
5. Businesses that received Paycheck Protection Program (PPP) loans may still be eligible for ERC but cannot use both benefits on the same qualified wages.
6. Qualified wages include salaries and other compensation paid by an eligible employer to employees during economic hardship caused by the COVID-19 pandemic.
7. For employers with over 100 full-time employees in 2019, qualified wages only include those paid to employees not working due to suspended operations or reduced demand.
8. Employers with fewer than 100 full-time employees in 2019 can claim credit for all employee wages, regardless of whether the employee was working during eligible quarters.
Familiarizing yourself with these eligibility criteria will help ensure your business maximizes its potential tax savings through the Employee Retention Credit program.
Calculation Process For the ERC
The calculation process for the Employee Retention Credit (ERC) is essential for small to medium-sized business owners seeking financial assistance and economic security during these challenging times.
To accurately assess your ERC calculations, determine how much you paid in qualified wages and health plan expenses on behalf of eligible employees per calendar quarter. For 2020, you can take taxable income to claim a refundable tax credit equivalent to 50% of qualified wages up to $10,000 per employee annually.
To illustrate this process further, suppose your business has ten eligible employees who were each paid $6,000 in qualified wages during any given quarter in 2020. You would multiply their combined qualified wages ($60,000) by the applicable credit rate (50%) and be entitled to a potential ERC of $30,000.
Definition And Purpose of the ERTC
The Employee Retention Credit (ERC) is a refundable tax credit designed to provide financial relief to eligible businesses during the COVID-19 pandemic.
The ERC allows qualifying businesses to receive a credit against their employment taxes for each calendar quarter. This means that if the amount of the credit exceeds your payroll taxes owed, you will be refunded the excess amount by the Internal Revenue Service.
ERC Application Deadline
The original deadline for claiming the Employee Retention Credit (ERC) was April 15th, 2021, for all eligible quarters in 2020.
Deadline For All Quarters In 2020
If you missed the deadline for claiming the Employee Retention Credit (ERC) for all quarters in 2020, it’s not too late to file. The original deadline was April 15th, 2024, so eligible businesses have until then to claim the credit on their payroll tax returns.
However, waiting until the deadline could mean missing out on potential refunds and benefits that come with timely filing. Don’t let confusion or uncertainty about eligibility criteria for calculating qualified wages discourage you from claiming your ERC before it’s too late.
Consult with a business solutions provider or tax expert if needed to ensure proper documentation and accurate filing of your ERC claim.
Consequences of Missing The Original ERC Deadline
Notably, missing the original deadline for claiming the Employee Retention Credit (ERC) can have significant consequences for eligible businesses. Failing to file your claim by the initial deadline means you could miss out on substantial tax benefits and lose thousands of dollars in potential refunds.
For instance, eligible employers who missed their filing deadlines in 2020 might have lost out on a credit of up to $5,000 per employee retained during the pandemic’s early stages.
Furthermore, if an employer fails to correctly apply for ERC or doesn’t include all necessary documentation when applying, they risk having their claims rejected entirely by the IRS.
As such, small to medium-sized business owners must take advantage of every opportunity presented by government stimulus programs like ERC while adhering strictly to all guidelines and deadlines set by authorities.
Extension Of The Employee Retention Credit Deadline
The deadline for claiming the Employee Retention Credit (ERC) has been extended to March 31st, 2021, providing more time for eligible businesses to apply.
March 31st, 2021 Deadline
There is still a chance to apply for eligible businesses that missed the original deadline to claim the Employee Retention Credit (ERC). The IRS extended the ERC deadline for the first quarter of 2021 from June 30th, 2021, to March 31st, 2022.
This gives those who qualify more time to take advantage of this valuable tax credit. To apply after missing the original deadlines for previous quarters in 2020 and the second to the fourth quarter in 2021, businesses can submit an amended employment tax return or revise their Form 941-X accordingly.
Requirements And Considerations For Claiming ERC After The Original Deadline
All hope is not lost if you miss the original deadline for claiming the Employee Retention Credit (ERC). Here are some requirements and considerations to keep in mind when claiming ERC after the original deadline:
1. Submit an amended employment tax return
You must submit an amended employment tax return if you missed the original deadline. This will allow you to claim and receive any credit amount that may have been missed.
2. Consider seeking professional help
Filing an amended tax return can be complex, so it may be a good idea to seek assistance from a professional knowledgeable about ERC who can help navigate the process.
3. Act fast
While businesses have until April 15th, 2024, to claim the ERC for 2020, it’s important to act fast and not delay submitting your claim beyond necessary. After all, if there’s money owed to your business in the form of either tax credits or refunds, it’s better in your pocket rather than floating somewhere else.
4. Keep detailed records
When filing for any type of credit or refund at a later date, it’s essential to maintain accurate records of qualified wages paid during each calendar quarter. That way, you can track eligible wages accurately and avoid mistakes when filing amended tax returns.
5. Stay up-to-date with changes
Given that new legislation affecting ERC claims keeps emerging, it’s important to stay current with any eligibility criteria or deadline changes. Failure to do so could result in missing out on credits that otherwise would have been available.
In summary, claiming ERC after the original deadline is still possible if certain requirements and considerations are followed carefully, including submitting an amended employment tax return as soon as possible, keeping detailed records of qualified wages paid, seeking expert assistance if required, acting fast once you realize that credits are available to you and always staying up-to-date with changes in eligibility criteria or deadlines.
Changes To The Employee Retention Credit In 2021
The American Rescue Plan Act has brought about revised eligibility criteria and updated extensions to the Employee Retention Credit.
The American Rescue Plan Act And Revised Eligibility Criteria
The American Rescue Plan Act has revised the Employee Retention Credit (ERC) eligibility criteria. Under the new guidelines, eligible businesses can now claim ERC even if they received a Paycheck Protection Program (PPP) loan.
The credit is also extended to include startup businesses established after February 15th, 2020, with less than $1 million in annual revenue. Additionally, under the updated rules of ERC, employers with gross receipts declining by more than 10% during any quarter of 2021 compared to the same period in 2019 are eligible to claim this tax credit.
Updated Extension And Changes To The Credit
The American Rescue Plan Act has significantly changed the Employee Retention Credit (ERC). One of the most crucial updates is that it extends the credit until December 31st, 2021.
This means eligible businesses can claim up to $28,000 per employee for wages paid between January and September 2021. Additionally, new eligibility requirements exist for businesses that were not previously qualified under the ERC program.
For instance, employers who started their business after February 15th, 2020, or suffered a revenue loss of less than 20% compared to their revenue in the corresponding third quarter of the pre-pandemic year can now also apply for ERC credit.
Revised Eligibility Criteria For The Employee Retention Credit
The revised eligibility criteria for the Employee Retention Credit (ERC) have added additional requirements and criteria businesses must meet to claim the credit. So, reading on and understanding whether your business qualifies is essential.
Additional Requirements And Criteria For Claiming ERC
To claim ERC, eligible employers must meet certain additional requirements and criteria, such as:
1. Due to government restrictions, the business must have experienced either a full or partial suspension of operations during any qualifying quarter.
2. The employer must also have experienced a significant decline in gross receipts during the corresponding calendar quarter compared to 2019.
3. Businesses with less than 500 employees can also qualify for ERC, including non-profit organizations.
4. To determine qualified wages, eligible employers must base them on whether the employee works full-time or part-time.
5. Wages paid to related parties, such as owners and family members, do not affect the ERC calculation.
6. Businesses can only claim the ERC for qualified wages paid between March 12th, 2020, and December 31st, 2021.
7. If an employer receives PPP loan funds, they cannot use those same wages to calculate their ERC tax credit.
8. To claim the ERC, businesses must file amended payroll tax returns or adjust their employment tax returns for each qualifying quarter on which they claim credits.
By meeting these additional requirements and criteria when claiming the Employee Retention Credit (ERC), eligible employers can receive financial assistance to help retain and support their employees through these challenging times while remaining compliant with the Internal Revenue Service (IRS).
How To Determine Eligibility If Your Business Qualifies for ERC Claims
You need to consider several factors to determine if your business is eligible for the Employee Retention Credit (ERC). Firstly, businesses that experienced a significant decline in gross receipts or were fully or partially suspended due to government orders during the pandemic are generally eligible.
The credit is also available to recovery startup businesses and certain tax-exempt organizations.
It’s important to note that eligibility requirements and criteria have evolved with changes in legislation related to COVID-19 relief efforts. For instance, the American Rescue Plan Act expanded ERC eligibility by reducing the threshold for gross receipts decline from 50% to 20%.
How To Qualify As A Recovery Startup Business
A recovery startup business is an entity that started business operations on or after February 15, 2020 with at least one W2 employee not including owners, operators, and family members. A recovery startup business is eligible if their annual gross receipts do not exceed $1 million for the 3-year tax period.
How To Claim The Refundable Tax Credit Before ERC Deadlines
To claim the Employee Retention Credit, eligible employers can use Form 941, Employer’s Quarterly Federal Tax Return, or Form 7200, Advance Payment of Employer Credits Due to COVID-19. They must provide documentation to support their claim.
Required Forms And Documentation for the ERTC
To claim the Employee Retention Credit (ERC), eligible employers must submit the necessary forms and documentation to the Internal Revenue Service (IRS). Here are the required forms and documents needed to claim ERC:
1. Form 941: Employers use this form to report quarterly employment taxes. To claim the ERC, eligible employers must report their qualified wages and any other advances or refunds received on Line 11c of Form 941 for each quarter they claim the credit.
2. Form 7200: Employers can use this form to request an advance payment of the ERC if their anticipated credit for a quarter is more than their federal employment tax deposit.
3. Documentation of eligibility: Employers must demonstrate their eligibility for ERC by providing proof of a significant decline in gross receipts or government restrictions that caused a full or partial suspension of business operations. For retroactive claims, employers should provide documentation showing they met the requirements during that period.
4. Records of Qualified Wages: Employers must maintain records of qualified wages paid during each quarter they are claiming the credit for up to three years after they were due or paid.
By submitting these required forms and documents, eligible businesses can receive financial assistance from ERC quickly and efficiently while avoiding potential errors and delays in processing claims.
Where To Submit ERC Claims
To claim the Employee Retention Credit (ERC), eligible employers can do so on their employment tax returns for each calendar quarter. This means businesses should include the credit on their Form 941, a quarterly payroll-adjusted employment tax return filed with the Internal Revenue Service (IRS).
It’s important to note that businesses must file amended payroll tax returns if they need to adjust their ERC amounts after submitting Form 941. The IRS also encourages businesses to use a business solutions provider or trusted advisor to help them navigate the complex process of claiming ERC.
Common Mistakes When Claiming The Employee Retention Credit
Business owners should be aware of common mistakes when claiming the ERC, such as incorrectly calculating qualified wages, claiming ineligible employees, or failing to provide required documentation; read on to learn how to avoid these pitfalls and maximize your credit.
Pitfalls To Avoid When Claiming The Credit
To ensure that businesses claim the Employee Retention Credit (ERC) accurately and avoid potential penalties, here are some common pitfalls to avoid:
1. Incorrect Calculation – Make sure you’re using the correct calculation method for qualified wages based on the number of full-time employees retained during the pandemic.
2. Not Meeting Eligibility Criteria – Ensure you meet all eligibility criteria before claiming the credit, including a significant decline in gross receipts or a full or partial suspension of operations due to government restrictions.
3. Inaccurate Documentation – Keep accurate documentation and records of all financial transactions related to ERC, including eligible wages paid and any other supporting documents requested by the IRS.
4. Filing Late – File for ERC on time; missing filing deadlines could result in penalties or delays in receiving the credit.
5. Claiming Double Credits – Avoid claiming maximum credit for both PPP loans and ERC for the same payroll period, as this is not allowed by law.
6. Excluding Certain Employees – Ensure all eligible employees are included in your calculations to maximize your credit amount, including those who worked part-time or were furloughed.
By understanding these potential pitfalls and properly calculating and documenting your ERC claims, you can ensure that your business maximizes its refundable tax credit without facing any legal issues or difficulties with the IRS.
How To Prevent Errors In Calculating ERC
To avoid errors in calculating the Employee Retention Credit (ERC), it’s essential to understand how the credit works and which wages are eligible. One common mistake is miscalculating qualified wages, leading to incorrect ERC claims.
To ensure accuracy, businesses should keep detailed employee and wage information records, including hours worked and pay rates.
Another potential error when claiming ERC could stem from inaccurate financial data inputted into the calculation formula. For instance, if a business incorrectly reports its gross receipts or payroll taxes paid during the pandemic, it may receive less than what they’re entitled to receive in ERC benefits.
The Employee Retention Credit is a valuable tool for small to medium-sized businesses looking to retain employees and stay financially viable during these challenging times.
Importance of Claiming The Employee Retention Credit
Claiming the Employee Retention Credit is crucial for eligible businesses as it can provide substantial financial assistance and help retain employees during challenging times, ultimately leading to long-term business stability and growth.
Benefits Of Claiming ERC For Your Business
Claiming the Employee Retention Credit (ERC) can have significant benefits for your business, such as:
1. Financial relief: The ERC is a refundable tax credit that can provide financial relief to eligible businesses affected by the COVID-19 pandemic. This credit can offset payroll taxes or receive a cash refund.
2. Increased cash flow: By claiming the ERC, eligible businesses can reduce their required deposits of payroll taxes and increase their available cash flow.
3. Supporting employee retention: The primary purpose of the ERC is to help businesses keep their employees on payroll during these challenging times. Claiming this credit can help your business retain its workforce and support your employees financially.
4. Reduced tax liability: Companies that qualify for the ERC can use it to reduce their overall tax liability, resulting in lower tax bills.
5. Business continuity: Claiming the ERC funds can help ensure business continuity by providing financial assistance during economic uncertainty caused by the pandemic.
6. Eligibility for other programs: Businesses that claim the ERC may also become eligible for other government aid programs designed to support small to medium-sized businesses impacted by COVID-19.
By claiming the Employee Retention Credit, your business could benefit in several ways, including financial relief, increased cash flow, support employee retention, reduced tax liability, business continuity, and eligibility for other government programs.
How The Credit Can Help Retain And Support Employees
The Employee Retention Credit (ERC) can be a vital resource for small to medium-sized businesses looking to retain and support their employees during challenging economic times.
By providing financial assistance for eligible employers, the ERC can help businesses keep their workforce intact, prevent layoffs, keep payroll costs and maintain employee morale.
For example, imagine a small business struggling due to the impacts of COVID-19. By claiming the ERC credit on qualified wages paid between March 12th, 2020, to March 31st, 2022, this business could receive up to $28,000 per eligible employee to retain them on the payroll.
In addition to financial benefits directly related to retention strategies like bonuses or wage increases using ERC funding, there are several additional benefits associated with retaining talented employees during difficult periods.
For one thing – having an experienced team helps ensure operational efficiency remains seamless despite changing circumstances such as remote work environments or supply chain disruptions which further boosts morale because staff feels they are valued members of your organization’s response team; through the use of government programs like ERC payouts, you show that you not only believe your staff has value but also offer tangible proof in terms of extra earning capability beyond standard wages or salaries.
Conclusion and Summary Regarding Is There A Deadline To Claim Employee Retention Credit?
Understanding the deadlines for claiming Employee Retention Credit (ERC) is crucial to maximizing your business tax savings. Don’t miss out on this opportunity, take action now to determine if you are eligible and submit the necessary forms before the deadline.
Final Thoughts on ERC
The Employee Retention Credit (ERC) is a valuable tax credit that can help businesses retain and support their employees during trying times. The ERC deadline for 2021 is July 31st, October 31st, and December 31st, so it’s crucial to act fast if you haven’t yet claimed your credit.
Remember to check your eligibility requirements carefully and gather all necessary documentation before submitting your claim. Also, remember that the ERC is a refundable tax credit, meaning any excess amount will be refunded to you.
Recommended Actions For Businesses Seeking ERC
To maximize the benefits of the Employee Retention Credit (ERC), small to medium-sized business owners can take the following recommended actions:
1. Check eligibility criteria: Determine if your business can claim the ERC based on the updated guidelines.
2. Review financial records: Review your financial records to determine if your business experienced a significant decline in gross receipts or had to fully or partially suspend its operations due to COVID-19 restrictions.
3. Calculate qualifying wages: Calculate the amount of qualifying wages paid during each eligible quarter of 2020 and 2021 and determine if you qualify for the full credit.
4. File amended returns: Consider filing amended payroll tax returns for previous quarters to claim retroactive ERC refunds if you didn’t previously apply for them.
5. Work with a professional: Consider working with an experienced tax professional or payroll provider who can help navigate the ERC program’s complexities and ensure accurate calculations and reporting.
6. Stay up-to-date on changes: Keep track of any updates or changes to the ERC program requirements, deadlines, and eligibility determination criteria, as they may impact your ability to claim the credit successfully.
By taking these recommended actions, businesses can effectively navigate the ERC program and maximize their eligibility for this valuable tax credit, helping them better retain and support their employees through challenging times.
Upcoming Deadline Reminders For ERC Claim
Eligible businesses must take note of upcoming deadlines for claiming the Employee Retention Credit (ERC). For 2021, there are three final dates when eligible employers can claim the employee retention tax credit with their quarterly Form 941 tax filings: July 31st, October 31st, and December 31st. These deadlines apply to all quarters in 2021, and businesses must not miss out on the opportunity to receive this valuable financial assistance.
Additionally, it’s worth noting that for all quarters in 2020, the deadline to apply for ERC is April 15th, 2024. For all quarters in 2021, the deadline to apply for ERC credit is April 15th, 2025.
Good news. There is still time to file! The employee retention tax credit can still be claimed retroactively and there is still time to file, even in 2023, 2024, and 2025 for the past tax years.
Employee Retention Tax Credit (ERC / ERTC) Help: Claim Up To a $26,000 Refund Per Employee for Your Business
Disaster Loan Advisors™ can assist your business with the complex and confusing Employee Retention Credit (ERC) and Employee Retention Tax Credit (ERTC) program, without you having to pay an excessive percentage of your hard earned ERC refund.
DLA doesn’t charge a percent like many companies do. Our flat fee structure is fair and reasonable based on the amount of work involved. Keep More of Your Refund™
Depending on eligibility, business owners can receive up to $26,000 to $33,000 per employee based on the number of W2 employees you had on the payroll in 2020 and 2021.
The ERC / ERTC Program is a valuable IRS tax credit you can claim. This is money you have already paid to the IRS in payroll taxes for your W2 employees.
Schedule Your Free Employee Retention Credit Consultation to see what amount $ of employee retention tax credit your company qualifies for.
ERC Deadline Urgency in 2024
April 15, 2024 Deadline for the 2020 ERC Tax Year
The deadline is coming up for the final opportunity to retroactively claim your business Employee Retention Credit for the past 2020 tax year. With the April 15, 2024 deadline fast approaching, we urge you; don’t let this final chance pass!
While not all businesses will qualify, as it depends on multiple factors per IRS Rules and Guidelines, you might be leaving significant financial relief on the table from prior COVID impact to your business during the past 2020 and 2021 business operation years.
Last year, in September 2023, the IRS temporarily paused processing ERC Claims for the remainder of last year. We at Disaster Loan Advisors (DLA) predicted this over one year ago when we made this ERC video warning business owners. See the ten-minute mark of the video for details.
TAKE ACTION NOW IN 2024
Even though the IRS has temporarily paused processing, you will still want to check eligibility and file now (if you qualify) because once the IRS will resume processing, ERC tax credit claims are processed in the order they are received.
If you haven’t previously filed for the ERC Credit, it is worth scheduling a phone call to at least explore your possible eligibility from both the past 2020 and 2021 business tax years. Contact us today for a deep-dive analysis to determine if your business qualifies one or more quarters from the 2020 and / or 2021 tax years.
As a leading dedicated member of the Tax and Accounting Team at Disaster Loan Advisors™, Mark focuses on unlocking the ERC Tax Credit's potential for eligible firms that qualify, providing strategic advice, and detailed guidance to ensure substantial financial recovery and growth. His methodical approach to client engagement includes comprehensive deep-dive analysis, customized consultation and guidance, and a commitment to achieving tangible results for each business served.
Disaster Loan Advisors™ (DLA) offers a comprehensive suite of services designed to navigate the complexities of the Employee Retention Tax Credit (ERC) program, ensuring that qualified businesses leverage the maximum possible benefit with minimum hassle. Unlike some firms that charge exorbitant contingency or percentage-based fees (often between 10% to 30% of your ERC refund), DLA operates on a fair and reasonable, transparent flat-fee structure that aligns with the IRS's guidelines.
If you are looking for an ERC Company that believes in providing professional ERC Services and value for small business owners, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors™ is a good fit for you. STAY SAFE. STAY COMPLIANT. KEEP MORE OF YOUR REFUND.™
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