Business always finds government laws perplexing and frustrating, especially when there are continuous changes in the rules and deadlines that are not easily understood. One such program is the Employee Retention Credit (ERC) offered by the Internal Revenue Service (IRS) as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act.
The qualification period for the ERTC program was originally scheduled to end on December 31, 2021. Later, it was modified to September 30, 2021, allowing only Q1, Q2, and Q3 payroll periods available for the ERC Credit. This made business owners even more confused about the deadlines and other program details.
The official ERC deadlines are:
– April 15, 2024 is the deadline to file an ERTC claim for the 2020 tax filing year.
– April 15, 2025 is the deadline to file the ERTC tax credit for the 2021 tax filing year.
Surprisingly, less than 5% of small businesses are even aware of this lucrative ERC tax credit program.
What is the ERC?
The 116th U.S. Congress approved the $2.2 trillion CARES Act as relief provisions. Additionally, President Donald Trump signed it on March 27, 2020, in reaction to COVID’s adverse effects. The CARES Act covered multiple benefits for businesses and the general public.
As part of the CARES Act, the Employee Retention Tax Credit (ERTC) was established to incentivize companies to keep paying their workers by offering credit to eligible employers for wages provided to eligible employees. This was done by giving credit to the qualified company.
The eligibility of an employer for the ERTC is based on meeting one of the following conditions, and that criteria must be completed during the calendar quarter that the employer chooses to use the credit:
- Businesses were forced to restrict their open hours and cease some or all activities.
- Businesses witnessed a considerable decrease in quarterly gross income as compared to 2019.
- Businesses suffered a decrease of 50% in 2020 in comparison to 2019.
- Businesses suffered a 20% income reduction in comparison to 2019
Learn more about How Does Employee Retention Credit Work.
Instructions to File Employee Retention Credit
There is currently no application for the ERC. Instead, firms may claim the ERC on their federal employment tax returns if they have at least one employee still working for them after the tax year.
In short, they can claim the credit on Form 941, Employer’s Quarterly Federal Tax Return, Form 944, Employer’s Annual Federal Tax Return, or Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees.
Eligible businesses must report the total qualifying leave wages on their federal employment tax return. However, if your federal employment taxes don’t cover the payments, you can fill out Form 7200. Make sure to file Form 7200 any time before the end of the month following the quarter in which you paid the qualified wages.
Deadline to File Employee Retention Credit
A company can make a backdated claim for the Employee Retention Tax Credit (ERTC). You have until April 15, 2024, to file claims for ERTC for the 2020 tax filing year, and until April 15, 2025, to file claims for ERTC for the 2021 tax filing year.
Check out more about Everything You Should Know About Employee Retention Tax Credit Deadline.
How to Calculate Employee Retention Credit?
For 2020, the tax credit is equivalent to 50% of the qualifying wages that eligible companies pay their workers during a calendar quarter. The qualified employers can only receive a maximum credit of $5,000 per employee per quarter.
For 2021, the tax credit equals 70% of qualified wages that eligible employers pay their employees. Here, a qualified employer can earn a maximum credit of $7,000 per employee per quarter. Check out Employee Retention Credit: How to Calculate.
Employee Retention Credit 2021 Worksheet
The IRS provides an Employee Retention Credit worksheet within Form 941 instructions. The worksheet helps determine the ERC amount once wage totals for the quarter have been calculated on pages 26 and 28.
Conclusion and Summary Related to Deadline to File Employee Retention Credits
The Employee Retention Tax Credit can undoubtedly be quite helpful for employers and employees. However, when you are calculating your ERC credits, make sure that you consult with your accountant for a precise and flawless calculation and file your claim before deadlines.
ERC is a valuable credit that can help businesses retain their employees. If you are not sure if you are eligible for the credit or not, consult a tax professional.
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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.
Depending on eligibility, business owners and companies can receive up to $26,000 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 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.
Cover Image Credit: 123RF.com / Andreypopov / Disaster Loan Advisors.