Does Adp Help With Employee Retention Credit

COVID-19’s pandemic caused unimaginable hardships to many organizations and businesses around the globe. Lockdowns, social distance, health and security measures and lockdowns have caused many employers to face reduced revenue, increased expenses and disruptions in their operations.

To help employers keep their employees, and to provide them with health insurance during these difficult times, the U.S. federal government has created the Employee Retention credit (ERC), an refundable tax credits that can offset some of payroll costs for employers who qualify.

The ERC was first enacted by the CARES Act in 2020 and was later extended and modified by subsequent legislation in 2021 and 2023. This article will describe what the ERC does, how it operates, and explain how to claim it.

For a brief reading of what the Employee Retention Credit or ERC is, take a look at this video from the YouTube channel “ERC Specialists”. You can also continue below to read an in-depth explanation of ERC.

What is the Employee Retention Credit? Does Adp Help With Employee Retention Credit

Employee Retention Tax Credit (ERC), is a refundable tax credit for organizations and businesses with employees who have been affected by COVID-19. The ERC, created in 2020 by the CARES Act, was then extended and modified through subsequent legislation in both 2021-2023. The ERC encourages employers to maintain their workers and to provide health benefits to them during the crisis.

Main Features & Benefits

The credit is a percentage of wages and health insurance premiums paid by eligible employees. There are limits per employee, per quarter.
The percentage and limit will vary depending on when the credit is claimed. In 2020, 50% of the employees will be eligible for the credit, with a maximum limit of $5,000 per employee. In 2021, 70% of the employees will be eligible for the maximum. The limit per employee is $7,000. For 2023, there is a 70% percentage for the first 2 quarters followed by 40% for the second two quarters. There is a $10,000 limit per employee. Does Adp Help With Employee Retention Credit
The credit is fully refundable, which means that if it exceeds the employer’s payroll tax liability the excess amount will be returned to the employer.
Employers who have experienced a significant drop in gross receipts or a complete or partial suspension of their operations as a result of a government order relating to COVID-19 can claim the credit. For 2023 only, employers that are classified as recovery startup business can claim the credit.
The credit may be claimed by filing a modified employment tax return (941-X), or by reducing the employment tax deposits to prepare for the credit. The credit can be requested in advance by employers using Form 7200.

> > Click Here to Find Out if You are Eligible for ERC < <

Eligibility Criteria

To qualify for Employee Retention credit (ERC), employers must meet either of two main criteria.

A government order has suspended or halted the business or organization of an employer due to COVID-19 in a calendar year 2020 or 2021.
Employer’s gross receipts in a calendar quarter of 2020 or 2021 was less than 50% or 80% of the gross receipts in the same quarter in 2019.

A special rule is in place for businesses that have started operating after February 15, 2020, and whose average gross receipts per year are no more than one million dollars. These businesses can be eligible for ERC regardless of their revenue decline or suspension.

Business Suspension

A government order can either suspend or fully suspend a company or organization if the following conditions are met:

The order prohibits travel, group meetings, and commerce due to COVID-19
The order has an impact on the business or organization
The order applies to any calendar quarter in 2020 or 2021

These are some examples:

Stay-athome orders restrict non-essential enterprises from operating
Businesses are restricted in their operating hours by curfews
Capacity limits that reduce the number of customers or clients that can be served by a business
Travel restrictions or bans that impact the ability of an organization to transport goods and services

To determine if a business was fully or partially suspended by a government order, an employer must consider:

The nature and extent of the order, and its impact on the operation of your business
The length and frequency of your order and the way it corresponds to the calendar quarters
The impact of an order on revenue and expenses

Revenue Decline

A significant decline in gross revenues is experienced by a business or organization if:

The gross receipts for any calendar quarter in 2020 were less than 50% of its gross receipts for the same quarter in 2019
The gross receipts from any calendar quarter during 2021 are less than 80% compared to the same quarter’s gross receipts from 2019.

Gross receipts refer to the total of all money received or accrued during a company’s annual accounting period. Gross receipts are:

Sales of goods & services
Rents, dividends, and annuities are examples of income streams that include interest, dividends.
Gifts, donations, and contributions Does Adp Help With Employee Retention Credit
Membership fees and dues
Gross revenue from businesses or trades

To compare gross revenues for different quarters an employer can use:

The same method of accounting (cash or accrual) that it used to file its federal income tax return for 2019
It will use the same calendar year quarters for 2019/2021 as it did to file its federal Employment Tax Returns (Form 941).
The same sources of revenue that they reported on their federal income tax return in 2019

Recovery Startup Business

The recovery startup business is one that:

You must have started your business after the 15th of February 2020
Average annual gross receipts not exceeding $1 million during the three-year period ending on the tax year immediately preceding the calendar quarterly for which the credit will be determined

A recovery startup business can qualify for the ERC regardless of whether it meets the criteria of business suspension or revenue decline. Recovery startups are not exempt from certain rules and restrictions.

The maximum amount of credit per quarter is $50,000
The credit is only available for wages paid in the third and fourth quarters of 2021
The maximum credit available for startup businesses is $250 million.

> > Click Here to Find Out if You are Eligible for ERC < <

Credit Amounts Calculation

For different lengths of time, different types of employers and different amounts of ERC, the ERC has different rules. The ERC’s main influences are:

How much an employer’s company was affected by the pandemic.
Employer’s number of employees in 2019 or 2021, and whether the employee worked or not.
How much did the employer pay each employee in health insurance?

Employers must complete and send IRS forms to claim ERC. The forms have to show how much the employer paid to their employees and their health insurance and why they qualify for the ERC. The IRS will verify the forms, and then give the money to your employer. The employer can then use the money for paying their employees, their health insurance and/or to receive refunds or credits on their payroll tax.

The ERC is not available forever. It started in March 2020 and will end in September 2022. The employer has to claim the ERC before it expires or becomes unavailable. The employer should also make sure to not waste the money. Does Adp Help With Employee Retention Credit

Here is more information about the ERC and its calculation.

Time Period

The ERC was introduced, amended, and terminated by different laws in 2020, 2021, and 2022. The amount of the credit varies according to the time period that it is applied for. The following table summarizes the key features and differences of the ERC for each time period:

Time Period	Law	Eligible Employers	Credit Rate	Qualified Wages
2020	CARES Act	Employers with business suspension or revenue decline of more than 50%	50% of qualified wages up to $10,000 per employee per year	Wages paid from March 13 to December 31, 2020
Q1-Q3 2021	CAA and ARPA	Employers with business suspension or revenue decline of more than 20%	70% of qualified wages up to $10,000 per employee per quarter	Wages paid from January 1 to September 30, 2021
Q3-Q4 2021 (Recovery Startup Business)	ARPA	Recovery startup businesses with average annual gross receipts of no more than $1 million,	70% of qualified wages up to $10,000 per employee per quarter (subject to a $50,000 cap per quarter),	Wages paid from July 1 to December 31, 2021,
Q4 2021 – Q3 2022 (Severely Financially Distressed Employer)	ARPA and IIJA	Employers with a revenue decline of more than 90%	70% of qualified wages up to $10,000 per employee per quarter	Wages paid from October 1, 2021, to September 30, 2022

The Number of Employees

The number affects the calculation of qualified wages for employees and their health insurance costs. A small employer or a large employer is determined by the number of employees who worked full-time (FTEs) in 2019 and the time period. The following table summarizes the thresholds and rules for determining the employer size for each time period:

Time Period	Small Employer Threshold	Large Employer Threshold
2020	Less than or equal to 100 FTEs in 2019	More than 100 FTEs in 2019
Q1-Q2 2021	Less than or equal to 500 FTEs in 2019	More than 500 FTEs in 2019
Q3-Q4 2021	Less than or equal to 500 FTEs in any calendar quarter in either calendar year beginning after December 31, 2019, and ending before July 1, 2021. If an employer did not have in either calendar year beginning after December 31, 2019, and ending before July 1, 2021, the employer is treated as a small eligible employer if it had less than or equal to 500 FTEs in any calendar quarter beginning after June 30, 2021. For recovery startup businesses, the employer size is irrelevant. For severely financially distressed employers, the employer size is irrelevant if the employer had a revenue decline of more than 90%. Otherwise, the same rules as Q1-Q2 2021 apply.	More than 500 FTEs in any calendar quarter in either calendar year beginning after December 31, 2019, and ending before July 1, 2021. If an employer did not exist in either calendar year beginning after December 31, 2019, and ending before July 1, 2021, the employer is treated as a large eligible employer if it had more than 500 FTEs in any calendar quarter beginning after June 30, 2021.

To count FTEs for a given year or quarter, an employer must use the following steps:

Count the number of employees who worked at least 30 hours per week (or at least 130 hours per month) for each month in the year or quarter
Add up the total hours worked by all other employees (who are not counted as FTEs) for each month in the year or quarter
Divide the total hours by120and round down to the nearest whole number
Add the number of FTEs from Step One and Step Three for each month in the year or quarter
Calculate the average number of FTEs by adding up the monthly totals and dividing by 12 (for a year) or 3 (for a quarter)

Qualified Wages & Health Insurance Costs

Qualified wage is the number of wages that are paid to employees who qualify during a time when a business has been suspended or revenue has decreased. Qualified wage includes tips and bonuses, as well as severance, pays, sick leave payments, family leave payments and other types of compensation. Qualified wages include health insurance costs for eligible employees such as co-pays and deductibles.

The calculation of qualified wages, health insurance costs and employer size depends on the time period. The following table summarizes the rules and examples for different scenarios: Does Adp Help With Employee Retention Credit

Employer Size	Time Period	Qualified Wages and Health Insurance Costs	Example
Small	2020	All wages and health insurance costs paid to any employee, regardless of whether the employee worked or not	An employer with 80 FTEs in 2019 paid $8,000 in wages and $2,000 in health insurance costs to an employee in 2020. The employer had a revenue decline of more than 50% in Q2 2020. The qualified wages and health insurance costs for Q2 2020 are $10,000.
Small	Q1-Q3 2021	All wages and health insurance costs paid to any employee, regardless of whether the employee worked or not	An employer with 400 FTEs in 2019 paid $12,000 in wages and $3,000 in health insurance costs to an employee in Q1 2021. The employer had a revenue decline of more than 20% in Q1 2021. The qualified wages and health insurance costs for Q1 2021 are $15,000.
Small	Q3-Q4 2021 (Recovery Startup Business)	All wages and health insurance costs paid to any employee, regardless of whether the employee worked or not (subject to a $50,000 cap per quarter)	A recovery startup business that began operations in March 2020 paid $9,000 in wages and $1,000 in health insurance costs to an employee in Q3 2021. The business had average annual gross receipts of $800,000. The qualified wages and health insurance costs for Q3 2021 are $10,000.
Small	Q4 2021 – Q3 2022 (Severely Financially Distressed Employer)	All wages and health insurance costs paid to any employee, regardless of whether the employee worked or not	An employer with 600 FTEs in Q2 2019 paid $11,000 in wages and $4,000 in health insurance costs to an employee in Q4 2021. The employer had a revenue decline of more than 90% in Q4 2021. The qualified wages and health insurance costs for Q4 2021 are $15,000.
Large	2020	Wages and health insurance costs paid to an employee for the time that the employee did not work (up to the amount that the employee would have been paid for working an equivalent duration during the 30 days immediately preceding the period of economic hardship)	An employer with 120 FTEs in 2019 paid $10,000 in wages and $2,000 in health insurance costs to an employee who worked full-time (40 hours per week) in 2020. The employer had a business suspension due to a government order in April 2020. The employee did not work for two weeks in April 2020. The qualified wages and health insurance costs for April 2020 are $2,308 ($10,000 x2/52+$2,000 x2/52).
Large	Q1-Q3 2021	Wages and health insurance costs paid to an employee for the time that the employee did not work (up to the amount that the employee would have been paid for working an equivalent duration during the 90 days immediately preceding the period of economic hardship)	An employer with 550 FTEs in 2019 paid $15,000 in wages and $5,000 in health insurance costs to an employee who worked full-time (40 hours per week) in Q1 2021. The employer had a revenue decline of more than 20% in Q1 2021. The employee did not work for three weeks in Q1 2021. The qualified wages and health insurance costs for Q1 2021 are $5,769 ($15,000 x3/13+$5,000 x3/13).
Large	Q3-Q4 2021 (Severely Financially Distressed Employer)	All wages and health insurance costs paid to any employee, regardless of whether the employee worked or not (only if the employer had a revenue decline of more than 90%. Otherwise, the same rules as Q1-Q32021 apply.)	An employer with 700 FTEs in Q4 2019 paid $12,000 in wages and $6,000 in health insurance costs to an employee who worked full-time (40 hours per week) in Q4 2021. The employer had a revenue decline of more than 90% in Q4 2021. The qualified wages and health insurance costs

> > Click Here to Find Out if You are Eligible for ERC < <

Claiming and Reporting the Credit

For the Internal Revenue Service to grant the Employee Retention credit (ERC), employers must file either a federal tax return for employment (Form 941), or an amended tax return for employment (Form941-X). The employer is required to report the qualified wages, health insurance costs and credit claimed by each quarter.

Form 941

Form 941 is used to report the employer’s quarterly federal tax liability, including income tax, social security tax, and Medicare tax. The employer can also claim the ERC in Form 941 for future or current quarters. Form 941 can be used by the employer to:

ERCs can be used to reduce the amount of tax that an employer must pay to the IRS.
If the ERC is greater than the tax that the employer must deposit, you can request an advance payment. Does Adp Help With Employee Retention Credit
Any excess credit can be carried forward to the next quarter

To avoid making common errors and fill out Form 941 correctly, employers should:

Use the most recent version of Form 941, which reflects any changes or updates to the ERC laws.
Follow the instructions and worksheets provided by the IRS for calculating and reporting the ERC
Use Line 1c to report on the health insurance and wages that eligible employees have received.
Use Line 13d when reporting the credit for each quarter.
Line 13f is used to report any advance payment of credit received by the IRS
Use Line 24 if you require an advance credit payment.
Use Line 25 to report any credit excess that can be carried over to the next quarter.
Sign Form 941, date it and attach any documents or schedules that you wish to include.

You can find some helpful tips on how to fill out Form 941 here:

Use electronic filing (e-file) or online services to submit Form 941 faster and more securely
Visit the IRS website to get the latest updates, FAQs, and guidance regarding Form 941 and ERC.
Need clarification? Contact an IRS agent or tax professional.

Form 941-X

Forms 941-X are used to rectify errors or make adjustments to Forms 941 previously submitted. The employer can also claim the ERC retroactively by using Form 941X. Form 941-X can be used by the employer to: Does Adp Help With Employee Retention Credit

Claim your refund or credit due to overpaid taxes by claiming the ERC
Report additional qualified wages and health insurance costs paid to eligible employees that were not reported on Form 941
The amount of credit claimed will be affected by any mistakes or omissions in Form 941.

The employer should:

Use the latest Form 941-X which reflects all the updates and changes made to the ERC by new laws.
Follow the IRS instructions and worksheets for calculating the ERC and reporting it.
Use Part 2 of Form 941 to indicate which lines are being amended or corrected.
Use Part 3 to explain why Form 941 is being corrected or adjusted
Use Line 24 for any additional qualified wage and health insurance expenses paid to eligible workers
Use Line 25 to claim any additional credit for each quarter.
Use Line 26 for any refunds or credits due to ERC claims.
Sign and date Form 941, and attach any supporting documentation or schedules

You can find some helpful tips on how to fill out the Form 941-X here:

Filter a separate Form 941/X for every quarter that needs to be corrected or adjusted Does Adp Help With Employee Retention Credit
Fill out Form 941-X immediately after you find an error in Form 941
Updates, FAQs, and guidance about Form 941X and ERC can be found on the IRS website.
You can also contact a tax expert or the IRS for clarification or additional assistance.

Deadline and Statute of Limitations

Form 941 must be filed by the last date of the month that follows the end each quarter. For example for Q1 (2021) (January – March), Form 941 should be submitted by April 30, 2019. Nevertheless, if the employer deposited all taxes due in a given quarter on time, they may file Form 941 before the 10th day. After the end quarter. For Q1 2021 (January-March), form 941 must be submitted by May 10, 2020, Does Adp Help With Employee Retention Credit

The deadline for filing Form 941-X is generally three years from the date that the original Form 941 was filed or two years from the date that the tax was paid, whichever is later. For Q1 2020, (January-March), the Form 941 must be filed by April 30th 2020. If the employer has filed Forms 941 and paid tax by April 30th 2020, they have until April 30th 2023 to submit Form 941X. If an employer filed Form 941 on April 30, 2020, and paid the tax on June 15, 2020, the deadline for filing Form 941-X is June 15, 2022.

> > Click Here to Find Out if You are Eligible for ERC < <

Conclusion

Employee Retention Tax Credit (ERC), is a valuable financial benefit that helps employers to keep their employees employed and reduces the impact COVID-19 has on their organization or business.

The ERC is a refundable tax credit that varies depending on the time period, the number of employees, and the amount of qualified wages and health insurance costs paid to eligible employees. The ERC is claimed by filing IRS Form 941 or 941-X and reporting qualified wages, health insurance costs, and the credit amount claimed for each quarter.

Do not miss out on this opportunity if you’re an employer that meets the ERC eligibility criteria. The ERC has a time limit and deadline for claiming. You should file your forms as soon as possible and use the tips and resources provided in this article to fill them out correctly and avoid common errors. For clarifications or help, you can always contact an IRS agent or tax professional.

ERC can have a significant impact on your business, organization, and your employees. You can use it to retain employees, keep your cash flowing, and recover after a pandemic. We hope this article has helped you understand more about the ERC and how to claim it. Thank you for reading, and stay safe.

> > Click Here to Find Out if You are Eligible for ERC < <

Does Adp Help With Employee Retention Credit

What is ERC and what does it do?

Employee Retention Credit: This is a credit that employers can claim if they retained employees during the COVID-19 pandemic.

The CARES Act created the American Rescue Plan Act of 2021 in March 2021. Later, the CAA (Consolidated Appropriations Act), in December 2020, was amended and expanded by ARPA (American Rescue Plan Act of 2021), in March 2021.

Who is eligible for the ERC?

Not everyone is eligible for the ERC. It is only available to employers who have retained employees and paid their wages to them between March 13, 2020, and December 31, 2021.

The criteria for eligibility is also listed above. For the highlights, please see:

A government order has suspended the business or organization (wholly or partially) due to COVID-19.
Their gross revenues for a quarter calendar in 2020 or in 2021 were lower than a percentage compared to their gross revenues for the same period in 2019.
The business is a startup that started operations after February 15, 2020, and has an average gross revenue of less than $1 million.

How much does the ERC cost?

The amount that an organization or company receives in ERC will depend on many factors.

Some of these include the time period and number of employees. Others are the amount paid in qualified wages or health insurance to eligible employees. The article above provides a detailed explanation on how ERC is calculated.

How to claim the ERC?

For an employer to claim the ERC, they must file either a federal reform of employment tax or an amended employment tax return (941-X).

The employer must report the qualified wages and health insurance costs paid to eligible employees and the amount of credit claimed for each quarter.

What is the deadline for submitting the ERC forms?

There are two different deadlines to file the ERC Forms: Form 941 (Form 941-X) and Form 941 (941).

For Form 941 is generally the last day of the month following the end of each quarter. The deadline for Forms 941-X, however, is usually three years after the date the original Form was completed. It can also be from two years from the date that the tax was paid, with the later date being the more preferred one.