Many small business employers are confused and curious about how the Employee Retention Credit (ERC) applies to their business. ERTC is a refundable rebate credit that a business can possibly claim on the qualified wages, such as health insurance costs paid to employees. In 2021, the employee Retention Credit allowed employers 70% of the total credit. This 70% is an increase from the previous credit, and it allows up to $10,000 of an employer’s qualified wage per quarter. The increase in credit is one such benefit that employers get. However, along with it, there are many other benefits that small businesses need to take advantage of before it ends.
In this blog, we will help you navigate through the ERC application process for your business. But first, let’s understand what an Employee Retention Credit is.
What Is The Employee Retention Credit?
ERC is a relief provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It is a refundable payroll tax credit for qualified wages paid to retained full-time employees. The primary purpose of the ERC is to encourage employers to keep their employees on the payroll. The provision further includes keeping their employees on the payroll even if they are not working during the coronavirus pandemic.
How To Apply For The Employee Retention Credit?
To get you quickly to the ERC process, we have curated 5 simple steps by which you can conveniently apply for Employee Retention Credit.
Gathering Basic Business Information
In the United States, the ERC is available to all businesses but not every business may qualify for it. So you have to work with your accountant or CPA to determine if your business can take advantage of this employee benefit credit for the practical qualification. For this, you have to start gathering all your basic business information, including legal business name, number of employees, legal address, and information. All this information with other significant ones has to be shown in the ERC application form.
Gathering Payroll Information
This is the next step for the ERC application. The employers who will qualify for the Employee Retention Credit have to pay for each quarter of 2020 and 2021 to the employee’s gross pay. If some of your employees have left your company, find out when they have stopped working for your small business.
Gathering PPP Loan Documents
If you have taken any PPP loans, you have to gather information on that, which includes the date the PPP loan was issued and the loan amount. Then, using your documentation of the PPP loans, you can determine how much you can receive in the ERCs. If you have not taken the PPP loan, you can skip this part.
Gathering Full-Time Employee Information Form 2019
For this, you need to gather full-time employees employed in your company for the year 2019. You need to note down their contact information, name and address of the job location, start and end date of the employment with your business.
If you are having a problem figuring out what is a full-time employee? Then remember, an employee who works 30 hours per week is a full-time employee and thus the hours must be at least 30 to apply for this credit. If someone is working less than 30 hours, they are not eligible for the minimum requirement of the ERC.
Collecting Sales Revenue Information
To apply for Employee Retention Credit, you will need to gather any sales revenue from 2019 to 2020. Your net income, your loss, and how many full-time employees you have determines the amount of your ERC. If your company does not have 100 employees or few, this part does not apply to you.
Are You Eligible For The ERC?
If you want your business to be eligible for the ERC, you have to carry on your trade or business from 2020 to 2021. This includes totally or partially suspended operations by the government. Furthermore, a decline in your gross receipts during the calendar year compared to 2019. If all these apply to your small business, you are most likely to qualify for the deadline. In that regard, the size of your business also matters. Your business needs to have 100 or less employees to qualify for the ERC. If you have more than 100 workers, you are not eligible to apply for the ERC.
How To Keep Your Employee Payroll Information?
It is crucial to have your employee payroll information from a payroll service. However, you most likely don’t have all the information, as a spreadsheet or a calculator cannot complete this process. In addition, several problems are associated with the ERC, such as documenting qualification methodology, coordination with the PPP loans, controlled group criteria, and health expenses.
Do You Need The W-2s Issued In 2020?
You need to know how many W-2s were issued in 2020 and 2021. The W-2s are the employee retention credit employee wages. These wages are paid before taxes, or another deduction was made from that amount. If your business does not pay employees with a W-2s, you are not eligible to have this employee benefit since it requires payroll information. If you still face any doubt regarding this, feel free to contact us.
Paying Qualified Wages
If your business is subjected to the federal insurance contribution act under your employee wage structure, then your small business is eligible for the ERC. Just make sure that you have proof of this.
Get Your ERC With CPA Due Diligence
ERC is a revolutionary step in providing relief from the pandemic. It has been providing small businesses with thousands of dollars, and it can be a sign of relief for your business too. With these easy to go 5 simple steps, you can qualify for the ERC within 5 days or less. Therefore, if you need more information on how to apply Employee Retention Credit or consult an ERC specialist, reach out to us or visit our website. Our team provides you with all the necessary information and assistance.