Employee Retention Credit Service For Business Owners

In the wake of economic uncertainty, many businesses are looking for ways to maintain stability and keep their employees on payroll. The CARES Act has made Employee Retention Credit (ERC) available to businesses, providing refundable tax credits for employees.

As experienced accountants and tax advisors, we are committed to helping you navigate the complexities of tax credits and ensure you receive the credits you are entitled to.

What Is The Employee Retention Credit (ERC)?

The ERC is a fully refundable tax credit designed to incentivize businesses to retain their employees during challenging economic times. It’s a crucial resource that can ease the financial burden for businesses.

The credit is available to businesses that have been impacted by the coronavirus pandemic, including those that experienced a drop in gross receipts or were forced to suspend operations due to government orders.

Employee Retention Credit Eligibility

To be eligible for the Employee Retention Credit, businesses and tax-exempt organizations must meet specific criteria. Generally, eligible employers are those who either experienced a significant decline in gross receipts or were subject to full or partial suspension of their operations due to government orders. Our team at TN CPA can help assess your eligibility and determine if your business qualifies for this valuable tax credit.

Credit Amount

Eligible employers can receive a maximum credit of $5,000 per employee for 2020 and up to $7,000 per employee per quarter for 2021.

Qualified Wages For An Eligible Employer

Qualified wages consist of salaries, health plan expenses, and certain other employee benefits. Depending on the size of the company, these wages could be those paid to all employees or only those paid to employees not providing services.

Process Of Applying For ERC

To claim the ERC, companies are required to report their total qualified wages, including associated health insurance expenses, on their quarterly tax returns (typically Form 941). This credit, which is refundable, will reduce the employer’s share of the Social Security tax.

Businesses that qualify for the credit but failed to claim it on their original employment tax return have the opportunity to do so by filing adjusted employment tax returns. For instance, if a business files quarterly employment tax returns, they can submit Form 941-X, which is the Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, to claim the credit for previous quarters in 2020 and 2021.

Note: If you choose to file Form 941-X to claim the Employee Retention Credit, it’s important to note that you’ll need to reduce your deduction for wages by the corresponding amount of the credit for that specific tax period. Consequently, you may find it necessary to amend your income tax return (such as Forms 1040, 1065, 1120, and so forth) in order to accurately reflect this reduced deduction.

How TN CPA Can Help You

At TN CPA, we bring vast expertise in managing a wide range of tax credit services, including the highly valuable Employee Retention Credit. Our team of committed accountants and knowledgeable business consultants remains well-informed about the latest tax regulations, guaranteeing your business’s compliance and maximizing potential credits. 

We provide tailored solutions, customized to the unique requirements of your business, optimizing both your tax benefits and financial outcomes. Trust us to navigate the complexities of taxes, ensuring your business thrives while securing significant savings.

Frequently Asked Questions On ERC

Navigating the ERC can raise several questions. Here are answers to some of the most common queries:

Is it too late to file for the Employee Retention Credit?

It is still possible to avail yourself of this valuable credit; however, there is a limited timeframe to start the application process and secure the funds that your business may be eligible for. 

The deadline for applying for the ERC in all quarters of 2020 is April 15, 2024, while for all quarters in 2021, it is April 15, 2025.

How long does it take to get retention credit?

The processing time for ERC refunds is typically six to eight weeks after employers have filed for it. It’s important to note that the waiting time may vary from business to business. Initially, refunds were processed within four to six weeks.

How is the ERC refund calculated?

Under the standard ERC regulations, you have the opportunity to receive a credit for 50% of the initial $10,000 in qualified wages paid to each employee during the year 2020. In 2021, you can claim 70% of the qualified wages, up to $10,000 per quarter, for each employee.

What documents do I need for ERC?

Below are the forms required to file for ERC. 

  • Form 941/941-X – Employer’s Quarterly Federal Tax Return 
  • Detailed Payroll Reports 
  • PPP Loan Application and Forgiveness 
  • Basic Information about your Business

Is the ERC refund taxable income?

Although the ERC itself is not considered taxable income, it does have an impact on your payroll deductions. If your business or organization qualifies for the Employee Retention Credit, you will need to decrease your payroll expense deduction by the amount of the ERC that has been claimed.

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