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Employee Retention Credits can be worth up to $33,000 per employee

Employee Retention Credit is a refundable payroll tax credit of up to $5,000 per employee per year in 2020 and $7,000 per employee per quarter in 2021 for a maximum credit of $33,000 per employee. The tax credit offsets all withheld federal employment taxes, including federal income tax withholding, Employer FICA, and Medicare. Any excess credit will be refunded or advanced by the IRS.

 

Businesses can qualify for ERC between March 12, 2020 – December 31, 2021, when they meet at least one of these requirements.

Business Requirements

– Their business operations were fully or partially suspended because of a government order OR

– In 2020, the business experienced a 50% reduction in quarterly receipts compared to the similar

quarter in 2019 OR

– In 2021, the business experienced a 20% reduction in quarterly receipts compared to a similar quarter in 2019.

Qualified wages

The type of wages that a business can use to claim ERC depends on the number of full-time employees they had in 2019. Qualified wages include the Eligible Employer’s qualified health plan expenses that are properly allocable to the wages.

– Businesses with 100 or fewer full-time employees in 2019 can claim ERC in 2020 for all eligible wages and health plan benefits paid to their employees.

– Businesses with over 100 full-time employees can only claim ERC in 2020 for wages or health plan benefits paid by the company when employees aren’t working.

The full-time employee count changed for 2021.

– Businesses with 500 or fewer full-time employees in 2019 can claim ERC in 2021 for all eligible wages paid to their employees.

– Businesses with over 500 full-time employees can only claim ERC for wages or health plan benefits

paid by the company when employees aren’t working.

PPP Recipients Can Qualify for ERC and WOTC

Previously, businesses that received Paycheck Protection Program loans were not eligible for ERC, but that restriction has been lifted. PPP recipients could claim ERC on wages if they were not paid with PPP loan funds that were forgiven. Taxpayers can claim ERC, WOTC, and other credits on qualified employees, but the same wage can’t be used to claim multiple credits. Wages and healthcare expenses need to be allocated to specific credits.

Capitalize on ERC

An experienced consultant can help taxpayers understand the complexities of ERC and avoid the pitfalls of audit risk areas. CCC can help businesses maximize ERC with the confidence of fully documented procedures and comprehensive audit-ready record keeping.

Request an Assessment

Contact CCC for free analysis of this benefit.


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