Employee Retention Credit Jobs

COVID-19, the pandemic that has swept across the globe in recent years, has brought unprecedented challenges and hardships to businesses and organisations around. 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 retain their employees and provide them with health benefits during this difficult time, the U.S. government has introduced the Employee Retention Credit (ERC), a refundable tax credit that can offset some of the payroll costs for eligible employers.

The ERC is a program that was introduced by the CARES Act of 2020. Subsequent legislation was passed in 2021 and in 2023 to extend and modify it. 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? Employee Retention Credit Jobs

The Employee Retention Credit (ERC) is a refundable tax credit for businesses and tax-exempt organizations that had employees and were affected by the COVID-19 pandemic. The ERC has been created by the CARES Act for 2020. It was further extended and modified with subsequent legislation in 2021, 2023. The ERC encourages employers to maintain their workers and to provide health benefits to them during the crisis.

Main Features and Benefits

Credits are equal to a percent of the qualified wages and costs for health insurance paid to eligible employees up to a limit per employee each quarter.
The percentage and limit will vary depending on when the credit is claimed. For 2020, the percentage is 50%, and the limit is $5,000 per employee for the entire year. For 2021, it is 70%. The limit is $7,000 per quarter per employee. 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. Employee Retention Credit Jobs
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.
The credit is available to employers who suffered a significant reduction in gross revenues or a partial or full suspension of operations because of an eligible government order relating COVID-19. For 2023 only, employers that are classified as recovery startup business can claim the credit.
Credits are available by submitting an amended employment return (Form 951) or by reducing deposits for employment taxes in anticipation. Employers can also request an advance payment of the credit by filing Form 7200.

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Criteria for Eligibility

Employers who wish to qualify for Employee Retention Credit (ERC) must meet two main criteria.

The employer’s company or organization has been suspended, either fully or partly, by an order of the government due to COVID-19 at a particular calendar quarter in 2020/2021
The employer’s gross revenues for a quarterly calendar period in 2020, 2021 or both were less that 50% (for the 2020 quarter) or 80% (2021 quarter) of its gross revenue for the same year-ago quarter.

In addition, there is a special rule for recovery startup businesses that began operations after February 15, 2020 and have average annual gross receipts of no more than $1 million. These businesses can qualify for the ERC regardless of business suspension or revenue decline.

Business Suspension

An order of the government can suspend a business or an organization in full or part if it:

The order limits travel, commerce or group meetings as a result of COVID-19
The order impacts the operations of a business or organization
This order is applicable to any calendar quarter of 2020 or 2021

Here are some examples of government orders that can result in a business being suspended:

Stay-at-home orders prohibiting the operation of non-essential businesses
Certain businesses are subject to curfews which limit their hours of operation
Limits to the number of clients or customers that a company can serve
Travel restrictions or travel bans that limit the ability of businesses to transport products or services

Employers must take into account the following to determine whether a business has been suspended in full or in part by an order of government:

The nature and extent of the order, and its impact on the operation of your business
The duration and frequency of the order and how it coincides with the calendar quarters
The impact and magnitude of the order to the business’s revenues and costs

Revenue Decline

It is considered that a business or organization has experienced a significant drop in gross receipts when:

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 of any quarter in calendar 2021 were below 80% of the gross receipts in the same quarter for 2019.

Gross receipts are the total amount that a business or organization has received or accrued from all sources, during its annual accounting period. Gross receipts include the following:

Sales of goods and services
Dividends (rents), royalties and interest
Contributions, gifts and grants Employee Retention Credit Jobs
Membership dues
Gross revenue from businesses or trades

To calculate and compare gross receipts for different quarters, an employer must use:

The same method for accounting (cash-based or accrual-based) that was used to file the federal income Tax return for 2019
The same calendar year quarters that it used to file its federal employment tax returns (Form 941) for 2019 and 2020/2021
The same sources of revenue that they reported on their federal income tax return in 2019

Recovery Startup Business

A startup that is in recovery can be defined as

You must have started your business after the 15th of February 2020
Has average annual gross receipts of no more than $1 million for the three-tax-year period ending with the tax year that precedes the calendar quarter for which the credit is determined

A recovery startup business can qualify for the ERC regardless of whether it meets the criteria of business suspension or revenue decline. Recovery startup businesses are subject to certain restrictions and special rules.

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

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Credit Amount and Calculation

ERCs have different rules and amounts depending on the length of time and type of employer. The main factors that affect the ERC are:

The employer’s business has been affected by the pandemic. This could be due to the government ordering the closure or reduction of operations or a significant drop in income from 2019.
How many employees the employer had in 2019 or 2020/2021, and whether they worked or not during the pandemic
What the employer paid each employee for their health insurance and during the pandemic

The employer has to fill out some forms and send them to the IRS to claim the ERC. The employer must provide proof of how much they paid their employees for health insurance as well as the ERC. The IRS will then check the forms before giving the money to employers. The employer could use this money to pay health insurance for employees or to get refunds and credits for payroll taxes.

The ERC will no longer be available. It started in March 2020 and will end in September 2022. The employer is required to claim ERCs before they expire, or are no longer available. The employer should also make sure to not waste the money. Employee Retention Credit Jobs

Below is more detailed information on the credit amount and calculation of ERC.

Time Period

Different laws introduced, amended and terminated the ERC in 2020, 2021 and 2022. The amount of the credit varies according to the time period that it is applied for. The following table summarises the main features and differences between the ERCs of 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

Number of Employees

The number employed affects how wages are calculated and defined, as well as the health insurance premiums for eligible employees. Employers are classified as small or large employers based on their number of full-time workers (FTEs), and the period in which they were employed. The following table summarizes rules and thresholds to determine employer size.

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 and Health Insurance Costs

Qualified wages include wages paid to eligible workers during a business suspension or revenue decrease. Qualified wage includes tips and bonuses, as well as severance, pays, sick leave payments, family leave payments and other types of compensation. Qualified salaries also include the costs of providing health coverage to eligible workers, including premiums, copays, deductibles, and coinsurance.

The calculation and definition of health insurance and qualified wages are dependent on the size of the employer and the time period. The following table summarizes the rules and examples for different scenarios: Employee Retention Credit Jobs

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

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Claim and Report the Credit

To claim the Employee Retention Credit (ERC), an employer must file a federal employment tax return (Form 941) or an adjusted employment tax return (Form 941-X) with the Internal Revenue Service (IRS). The employer has to report each quarter the wages and costs of health insurance paid to employees who are eligible and the credit claimed.

Form 941

Form 941 is used to report the employer’s quarterly federal tax liability, including income tax, social security tax, and Medicare tax. Form 941 allows the employer also to claim ERCs in current or future quarters. Form 941 allows the employer to do:

ERC reduces taxes that employers have to deposit at the IRS.
The employer can request an advanced payment of the ERC credit if it exceeds taxes that they have to deposit. Employee Retention Credit Jobs
Any excess credit can be carried forward to the next quarter

The employer should:

Use the latest version of Form 941 that reflects the changes and updates made by the laws that affect the ERC
The IRS has provided worksheets to help you calculate the ERC.
Use Line 11c to report the qualified wages and health insurance costs paid to eligible employees
Use Line 13d when reporting the credit for each quarter.
Use Line 13f for any advance payment received from IRS.
If you need to receive an advance payment, use Line 24.
Use Line 25 to report any credit excess that can be carried over to the next quarter.
Sign and date Form 941, and include any supporting documents and schedules.

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

Use online services or electronic filing to submit Form 941 more quickly and securely
Updates, FAQs, and guidance about Form 941, the ERC, and other IRS forms can be found on the IRS website.
Need clarification? Contact an IRS agent or tax professional.

Form 941-X

Form 941-X is used to correct errors or make adjustments on a previously filed Form 941. The employer can also claim the ERC retroactively by using Form 941X. Form 941-X can be used by the employer to: Employee Retention Credit Jobs

Claim refunds or credits for taxes overpaid due to the ERC
Report additional qualified wages and health insurance costs paid to eligible employees that were not reported on Form 941
Correction of errors or omissions on Form 941 which affect credit amount claimed

To fill out Form 941-X correctly and avoid common errors, 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 to indicate the lines on Form 941 that are being corrected or adapted.
Use Part 3 of Form 941 to explain why it is being amended or corrected
Line 24 should be used to record any additional health insurance and wages paid to employees who qualify.
Use Line 25 to report any additional amount of credit claimed for each quarter
Use Line 26 for any refunds or credits due to ERC claims.
Sign and date the Form 941 X and add any supporting documents or schedules.

Here are some tips and resources to help you fill out Form 941X:

Filter a separate Form 941/X for every quarter that needs to be corrected or adjusted Employee Retention Credit Jobs
File Form 941-X as soon as possible after discovering an error or making an 0adjustment on Form 941
Check the IRS website for updates, FAQs, and guidance on Form 941-X and the ERC
If you need clarification or assistance, contact the IRS or an accountant.

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, Form 941 for Q1 of 2021 (January to March) is due April 30, 2020. Nevertheless, if the employer deposited all taxes due in a given quarter on time, they may file Form 941 before the 10th day. The end of the quarter. For example, the Q1 of 2021 is January-March. The Form 941 should be received by May 10th, 2021. Employee Retention Credit Jobs

Form 941X must be filed within three years of the original filing date or two from the payment date, whichever comes later. For example, for Q1 2020 (January-March), Form 941 was due by April 30, 2020. If an employer files Form 941 by April 30, 2020 and pays the tax on April 30 2020, then the deadline to file Form 941-X will be April 30, 2023. If an employee filed Form 941 April 30, 2020 and paid tax June 15, 2020 the deadline for submitting Form 941 X is June 15, 222.

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Conclusion

The Employee Retention Credit (ERC) is a valuable tax benefit that can help employers who were affected by the COVID-19 pandemic keep their employees on the payroll and reduce the impact of the pandemic on their businesses or organizations.

The ERC, a refundable credit, varies according to the time period and number of employees as well as the amount of qualified wage and health insurance expenses paid to employees who are eligible. 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.

Don’t miss this chance to get a tax break if your employer meets the ERC criteria. The ERC cannot be claimed forever. There is a deadline to claim it and a statute that limits its use. To avoid making common mistakes, you should fill out the forms correctly using the information and tips in this article. If you need clarification or assistance, you can contact the IRS.

The ERC is a great tool for both your business and employees. It will help you to keep your employees, maintain a healthy cash flow, as well as recover from pandemic. This article is intended to help you better understand the ERC, and how it can be claimed. Thanks for reading and please stay safe.

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Employee Retention Credit Jobs

What is the ERC?

The Employee Retention Credit is a tax credit for employers who retained their employees in their payroll during the COVID-19 pandemic.

The CARES Act was passed in March 2020. It was amended and extended in December 2020 by the CAA Act (Consolidated Appropriations Act) and in March 2021 by the ARPA Act (American Rescue Plan Act of 2021).

Can everyone apply for ERC?

ERC isn’t available to everyone. It is only available to employers who have retained employees and paid their wages to them between March 13, 2020, and December 31, 2021.

More details are available above. But here are some of the highlights.

A government order imposed a suspension (full or partial) on the business or organization due to COVID-19.
Their gross receipts in a quarter of 2020 or 2021 are less than the percentage of their gross revenue in the same quarter of 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.

These factors include time, the number of employees and the amount of wages that qualify. They also include health insurance costs for eligible employees. You can read the article above for a more detailed explanation of how ERC is calculated.

How do I claim my ERC?

To claim ERC benefits, an employer needs to file Form 941X or federal employment tax reform with the IRS.

Employers are required to report each quarter the total amount claimed as a credit and the wages and insurance premiums paid by eligible employees.

When is the deadline to file the ERC Forms

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

The deadline for Form 941 is usually the last day in the month after the end of every quarter. The deadline for Forms 941-X, however, is usually three years after the date the original Form was completed. This can also be up to two years, based on the date when the tax is paid.