The Employee Retention Tax Credit. What you need to know. A SurePayroll Mainstreet Minute
Back of the Napkin welcomes Holly Wade, Executive Director of the National Federation of Independent Business (NFIB) to the SurePayroll Mainstreet Minute. In this season 3 BOTN episode, Holly explains the Employee Retention Tax Credit. Check out the SurePayroll Blog post on the Employee Retention Tax Credit to learn more.
COVID continues to impact businesses big and small. The Employee Retention Tax Credit was established early last year to help struggling employer businesses during the pandemic. “It did not receive much attention initially because eligibility excluded those businesses participating in the Paycheck Protection Program,” said Wade. “Due to recent legislative changes, eligibility is not only expanded, but the actual credit is more generous.” According to Wade, the Employee Retention Tax Credit increased from $5,000 per employee in 2020 to up to $7,000 per employee per quarter in 2021.
“Eligible employers can immediately access the credit by reducing employment tax deposits they are otherwise required to make. Plus, if the employer's employment tax deposits are insufficient to cover the credit, the employer may get an advance payment from the IRS,” said Wade. The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021.
According to the IRS, employers, including tax-exempt organizations, are eligible for the credit if they operated a trade or business during calendar year 2020 and experienced either the full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel or group meetings due to COVID-19, or a significant decline in gross receipts.
Wade suggests that if business decreased from 2019, it’s worth checking to see if you qualify for the Employee Retention Tax Credit. “The credit can be a bit complicated,” said Wade. “NFIB strongly suggests working with an accountant, a CPA or bookkeeper who's familiar with the terms and conditions of the credit and can help you navigate through the program.”
Employers claim the tax credit by withholding payroll taxes for qualified employee wages or by amending prior payroll taxes by submitting the 941-X form.
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