April 6th 2023.
The Employee Retention Tax Credit (also known as the Employee Retention Credit) was a tax-savings incentive for businesses to retain their employees during the pandemic. It helped companies reduce their payroll costs and was available for tax years 2020 and 2021, expiring on October 31, 2021. With the CARES Act, Consolidated Appropriations Act, and the American Rescue Plan Act amending the program, eligible employers could claim a refundable payroll tax credit for qualified wages paid during the pandemic. The credit was equal to 50% of up to $10,000 in wages paid per employee for all qualifying quarters between March 13, 2020, and December 31, 2020, with the American Rescue Plan Act increasing the credit to 70% of up to $10,000 in qualifying wages per quarter in the first three quarters of 2021.
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To be eligible for the Employee Retention Credit, businesses must meet the definition of "severely financially distressed employers" and must have either been ordered to partially or fully shut down by a government authority or experienced a decline in gross receipts by 50% or more compared to the same timeframe in 2019. Businesses can apply for the credit by withholding payroll taxes to claim the credit and can receive up to $10,000 per employee annually. The IRS applies the credit to the employer portion of the employee's social security tax, which is fully refundable.
For businesses needing their ERTC funds sooner, lenders and lending marketplaces offer ERTC advances, which are essentially selling ownership of the credit in exchange for an advance. For tax year 2020, the deadline to file for the ERTC is April 15, 2024, and for 2021, it is April 15, 2025. The average time it takes to receive the funds is six months to one year, though it can take longer.
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Applying for ERTC advances through United Capital Source is easy. All businesses need to do is follow the steps outlined by the lender to request an advance payment for the ERTC. Benefits of this option include getting access to the refund sooner, being able to use the funds to cover operational expenses, and potential tax deductions on interest. However, there are drawbacks such as having to pay interest on the advance, reconciling the advance ERC against the actual ERC at the end of the quarter, and requiring extensive documentation.
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The Employee Retention Tax Credit, also known as the Employee Retention Credit, was a great tax-savings incentive for businesses to retain employees during the pandemic. It allowed companies to reduce their payroll costs and receive a refundable payroll tax credit. The program expired on October 31, 2021, but qualifying businesses can still retroactively file to take advantage of the credit for tax years 2020 and 2021.
Eligible employers can claim the credit for qualified wages paid during the pandemic. To qualify, businesses must have been partially or fully shut down by a government order, or experienced a decline in gross receipts by 50% or more compared to the same timeframe in 2019. Companies withhold payroll taxes to claim the employer retention tax credit.
The credit is equal to 50% of up to $10,000 in wages paid per employee for all qualifying quarters between March 13, 2020, and December 31, 2021, with a maximum of $10,000 per employee annually. In 2021, the credit is increased to 70% of up to $10,000 in qualifying wages per quarter, equaling a total of $21,000 per employee annually.
The IRS applied the credit to the employer portion of the employee’s social security tax, and it is fully refundable.
Who is eligible to receive the Employee Retention Credit? Qualifying businesses must meet the definition of “severely financially distressed employers” and be either ordered to partially or fully shut down by a government authority, or experienced a decline of 50% or more in gross receipts for the corresponding quarter in 2019 due to Covid-19-related decline.
What is the deadline to file for an ERTC? The deadline to file for an ERTC for tax years 2020 and 2021 is April 15, 2024 and April 15, 2025, respectively.
Is it possible to get my ERTC funds sooner? Yes! Several lenders and lending marketplaces offer ERTC advances so businesses can access the funds to support and grow their business sooner. This process is essentially selling ownership of your ERTC in exchange for an advance.
When the IRS issues the ERC refund check, it goes to the lender to repay the advance. Some lenders will charge a small monthly interest rate until the check is received, while others might charge a one-time fee.
How to Apply for an ERTC Advance: Follow these steps to request advance payments for ERTC through United Capital Source
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(Image Source: https://www.unitedcapitalsource.com)
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