Looking to save big or find the cash to offset recent hiring costs? Thanks to the Employee Retention Credit and other tax savings opportunities, many employers of all sizes can do so.
WHAT IS THE EMPLOYEE RETENTION CREDIT?
The Employee Retention Credit (ERC) is a refundable payroll tax credit available through the CARES Act to businesses impacted by COVID-19. A qualified company can receive up to a maximum amount of $26,000 per employee: for 2020, 50% of $10,000 in gross wages per year; for 2021, 70% of $10,000 in gross wages per quarter.
Initially, the ERC was not available to businesses that had received PPP loans, but more employers are eligible due to recent changes. The Taxpayer Certainty and Disaster Relief Act of 2020 and the American Rescue Plan Act of 2021 expanded both eligibility and the amount of credit available. The ERC is now available for 2020 and 2021 with retroactive implications.
The ERC is intended to encourage employers that keep employees on their payroll even if they have not been working due to the COVID-19 outbreak. These tax credits can make a major impact on your business’s bottom line.
DO YOU QUALIFY FOR THE EMPLOYEE RETENTION CREDIT?
To be eligible, your business must have been either: a) fully or partially suspended by business orders, or b) have experienced a reduction in year over year gross receipts of 50% in 2020 or 20% in 2021. There are many definitions on what suspended means. We can help you navigate these important questions. One of our partner companies, who consults with the House Finance Committee, co-authored the ERC and we are aware of all the intricate nuances.
LG Resources can help you determine your eligibility level based on either full/partial suspension or a gross receipts test. Businesses of all sizes can be eligible for the ERC, although the amount of credit available is determined differently for large and small employers. For employers with 500 employees or less, all wages may qualify for the ERC; for employers with more than 500 employees, we would look at qualifying wages to determine the ERC amount.
