Employee Retention Credit: Let’s Talk About the Benefits
Do you remember the CARES Act that came into law in March 2020? It made history as the most extensive rescue package in US history, at over $2 trillion.
The package included several programs that are still active today to help businesses and employees affected by the COVID-19 pandemic, which is still surging.
One of those programs is the employee retention credit (ERC). It encourages businesses to keep their employees on payroll during any quarter when business operations are stopped due to the coronavirus.
To learn more about the ERC and its benefits, keep reading.
Employee Retention Credit
When the reality of COVID-19 set in, it was clear that businesses across the country would be deeply affected. Thus, the government knew that employees would lose their jobs in droves if they didn’t create tax credits for businesses or an employee retention program.
It didn’t make sense to lay off employees en masse if their jobs would be available again post-pandemic. Therefore, they created the employee retention credit program.
It is a refundable payroll tax credit paid to keep full-time employees on staff. The program bases qualified wages for the credit on your average number of employees in 2019. The original period ended on December 31, 2020. And, the credit was worth up to $5,000.
However, the government extended the program from the beginning of 2021 to June 30, 2021. For this period, they increased the credit to $14,000 per employee kept on staff. In addition, some aspects of the program have been further extended until the end of 2021.
These are just some of the significant activities to come out of the ERC. If you want more information about the program, visit ERC Today to answer all of your questions.
The Benefits of ERC
Almost all employers qualify for the ERC after the enactment of the American Rescue Plan Act. The Act added another $1.9 trillion to assist Americans. What’s more, the credit amount has gone up in 2021 from 50% to 70%.
The nonrefundable pieces parts of the program will be claimed against Medicare taxes, not Social Security like they were in 2020. However, if the credit exceeds the employer’s total liability, the government may refund the excess to the employer, depending on the conditions.
Furthermore, IRS notice 2021-49 states that qualified wages include tipped wages, but only if subject to the Federal Insurance Contributions Act (FICA). This is still great news for service industry employees.
The government also added a third category to cover Q3 and Q4 of 2021. The additional coverage includes the Recovery Startup Business program to assist those who started a business after February 15, 2020.
Additionally, employers who received a Paycheck Protection Program (PPP) loan can use the ERC program for wages excluded from payroll costs.
Those who qualify may get up to $50,000 per quarter in assistance.
Seek Out Covid-19 Aid Today
The employee retention credit has already been beneficial for many companies and employees across the country. If you haven’t already done so, consider applying for 2020 and 2021 to recover employees’ salaries lost due to the pandemic. It is not too late to apply, so don’t miss out on receiving your hard-earned money.
To read more about business and finance, check out these sections of the blog above.
