Employee Retention Credit Wisconsin

The COVID-19 pandemic has caused unprecedented challenges and hardships for many businesses and organizations around the world. Due to lockdowns and social distancing as well as health and safety measures, many employers have seen their revenues and expenses drop, while operations are disrupted.

Employee Retention Credit is a refundable income tax credit available to eligible employers that helps them retain their employees while providing health benefits.

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? Employee Retention Credit Wisconsin

Employee Retention Credit (ERC) is a refundable credit available to tax-exempt and for-profit organizations and businesses that have employees who were affected by COVID-19. 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 & Benefits

The credit is equal to a percentage of qualified wages and health insurance costs paid to eligible employees, up to a certain limit per employee per quarter.
The credit limit and percentage are dependent on the period of time for which you claim the credit. For 2020, the percentage is 50%, and the limit is $5,000 per employee for the entire year. For 2021, the percentage will be 70%, and the limit per quarter is $7,000 for each employee. For 2023, there will be a 70 percent percentage for the initial two quarters of the year and a 40 percent percentage for the last two. There will also be a limit of $10,000 per employee each quarter. Employee Retention Credit Wisconsin
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 can be claimed by employers who experienced a significant decline in gross receipts or a full or partial suspension of operations due to a qualifying government order related to COVID-19. The credit can be claimed by employers who have been classified as recovery startups only until 2023.
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. By submitting Form 7020, employers can request an early payment of their credit.

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Eligibility Criteria

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

A government order suspended the employer’s organization or business in full or part due to COVID-19 for a calendar quarter of 2020 or 2021
The employer’s gross receipts for a calendar quarter in 2020 or 2021 were less than 50% (for 2020) or 80% (for 2021) of its gross receipts for the same quarter in 2019

There is also a special rule that applies to recovery startups, which are businesses that started operations after February 15th 2020 with gross receipts no higher than $1,000,000 on average. These businesses qualify for ERC despite business suspensions or revenue decreases.

Business Suspension

A business or organization is considered fully or partially suspended by a government order if:

The order limits travel, commerce or group meetings as a result of COVID-19
The order affects the operations of the business or organization
The order applies to any calendar quarter in 2020 or 2021

Examples of government orders which can lead to a suspension of business include:

Stay-at-home orders restricting non-essential business operations
Curfews that limit the hours of operation for certain businesses
Capacity limitations that reduce the amount of customers or clientele that a firm can service
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:

How the nature and scope and the order affect the operation of the business
The duration and frequency of the order and how it coincides with the calendar quarters
The order’s impact on revenues and expenses

Revenue Decline

A business or organization is considered to have experienced a significant decline in gross receipts if:

The gross receipts from any quarter in 2020 is less than 50% its gross receipts from the same calendar quarter in 2019.
The gross revenue for any quarter of 2021 was less than 80% that for the same period in 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
Dividends (rents), royalties and interest
Contributions, gifts and grants Employee Retention Credit Wisconsin
Membership dues
Gross profit from business or trade

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

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

Recovery Startup Business

Recovery startup businesses are those that:

After February 15, 2020, you can start any business or trade.
Have average annual gross income of no more than $1 million over the three-year period ending the tax year before the calendar quarter in which the credit is determined

It does not matter if a business meets the criteria of revenue decline or business suspension, a recovery-startup business qualifies for the ERC. Recovery Startup Businesses are still subject to some restrictions and special rules.

Maximum credit per quarter: $50,000
Only wages paid during the third and fourth quarters in 2021 are eligible for this credit
The credit is subject to an overall cap of $250 million for all recovery startup businesses

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Credit Amounts Calculation

ERCs have different rules and amounts depending on the length of time and type of employer. The ERC is primarily affected by:

How much an employer’s company was affected by the pandemic.
How many employees an employer had in 2019, 2020/2021 or whether they worked, or did not work during the pandemic
How much did the employer pay each employee in health insurance?

To receive the ERC, employers must submit forms to the IRS. The employer must provide proof of how much they paid their employees for health insurance as well as the ERC. The IRS will verify the forms, and then give the money to your employer. The employer may use the money in order to pay their employees’ health insurance premiums, or get refunds for their payroll tax.

The ERC is not available forever. It started in March 2020 and will end in September 2022. Employers must claim their ERC before they expire or become unavailable. Employers must also use the money well and not waste it. Employee Retention Credit Wisconsin

You can find more information below on ERC calculation and credit amount.

Time Period

Different laws introduced, amended and terminated the ERC in 2020, 2021 and 2022. The credit amount varies depending on the time period for which it is claimed. The table below summarises key features and differences for the ERC in each time frame:

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 of eligible employees will affect the calculation and definition of health insurance and qualified wages. 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. This table summarizes thresholds and rules to determine the size of an employer for each 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 and Health Insurance Costs

Qualified Wages are wages that eligible employees receive during periods of suspension or decline in revenue. Qualified wage includes tips and bonuses, as well as severance, pays, sick leave payments, family leave payments and other types of compensation. Qualified wage also includes the cost of health insurance for eligible employees. This may include premiums, deductibles, co-pays, or co-insurance.

The employer size, the time period and the calculation of the qualified wage and health insurance cost will affect the calculation. Table 1 summarizes and gives examples of rules in various scenarios. Employee Retention Credit Wisconsin

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 the Credit and Report It

To claim the Employees Retention Credit, an employer must file with the Internal Revenue Service a federal Employment Tax Return (Form941) or a adjusted Employment Tax return (Form941X). The employer must declare the wages and health insurance premiums paid to eligible employees, as well as the credit amount claimed each quarter.

Form 941

Form 941 allows employers to declare their quarterly federal taxes, including income taxes, Medicare and Social Security tax. Form 941 allows employers to claim ERCs for current or future quarterly periods. Form 941 allows the employer to do:

ERC – Reduce the amount the employer is required to pay in taxes.
The employer can request an advanced payment of the ERC credit if it exceeds taxes that they have to deposit. Employee Retention Credit Wisconsin
Any excess credit can be carried forward to the next quarter

To fill out Form 941 correctly and avoid common errors, the employer 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 11c to declare the wages and costs of health insurance paid to employees who qualify.
Use Line 13d for the credit claim amount per quarter
Use Line 13f to declare any advance payments received from the IRS.
Use Line 24 to request a credit advance if necessary
Line 25 is the place to enter any excess credit which can be carried to a subsequent quarter.
Sign and date Form 941, and include any supporting documents and schedules.

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

Use electronic filing (e-file) or online services to submit Form 941 faster and more securely
You can find updates, FAQs, and more information on the IRS site about Form 941, the ERC.
Contact the IRS or a tax professional for assistance or clarification if needed

Form 941-X

The Form 941X can be used to make corrections or adjustments on an earlier Form 941. Form 941 X also allows for the employer to claim ERC retroactively. The employer may use Form 941 to: Employee Retention Credit Wisconsin

Claim a refund or credit for overpaid taxes due to claiming the ERC
Report any additional wages or health insurance costs that are paid to employees who are eligible but not reported on Form 951.
Correct any errors or omissions you find on Form 941, which may affect your credit claim.

Employers can avoid common mistakes by filling in Form 941X correctly.

Use the latest form 941X that reflects changes to laws that are applicable to the ERC.
Use the IRS worksheets and instructions to calculate and report the ERC
Use Part 2 of Form 941 to indicate which lines are being amended or corrected.
Use Part 3 to explain the reason for a correction or adjustment on Form 941
Line 24 should be used to record any additional health insurance and wages paid to employees who qualify.
Use Line 25 for any additional credit claimed each quarter.
Use Line 26 to report any refund or credit requested due to claiming the ERC
Sign and date Form 941-X and attach any supporting documents or schedules

Tips and resources on how to complete Form 941 X include:

Filter a separate Form 941/X for every quarter that needs to be corrected or adjusted Employee Retention Credit Wisconsin
Fill out Form 941-X immediately after you find an error in Form 941
Visit the IRS website to get the latest updates, FAQs, and guidance regarding Form 941-X, the ERC, and other forms.
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, Q1 2020 (January-March) Form 941 will be due on April 30, 2021. However, if an employer made timely deposits of all taxes due for a quarter, it can file Form 941 by the 10th day of the second month. After the end of the quarterly period. For example, for Q1 2021 (January-March), Form 941 is due by May 10, 2021, Employee Retention Credit Wisconsin

The deadline to file Form 941-X generally is three years after the date the original Form 941 is filed, or two years after the date the tax is paid. For Q1 2020 (January – March), for example, Form 941 is due on 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 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.

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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.

You should not miss the opportunity to benefit from this tax incentive if you are an eligible employer. The ERC is not available forever and has a deadline and a statute of limitations for claiming it. 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. If you need clarification or assistance, you can contact the IRS.

ERCs can be a huge help to your organization or business and its 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. We thank you for reading. Please stay safe.

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Employee Retention Credit Wisconsin

What is ERC?

Employee Retention Credit is an employer tax credit available to employers who kept their employees on payroll during COVID-19.

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.

Is everyone eligible for the ERC?

ERCs are not available to all. Only employers who paid wages and retained employees between March 13, 2019, and December 31, 2020, are eligible.

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

A government order suspended the business (fully or partly) because of the COVID-19 epidemic.
The gross receipts of a calendar quarter for 2020 or 2021 were less than a percent of the gross receipts from a similar quarter in 2019.
It is a recovery-startup business that has been operating since after February 15, 2020. Their average annual gross receipts are no more than one million dollars.

What is the ERC worth?

The amount of ERC that a company will receive depends on a number of factors.

One of the factors is the length of time the company has been in business, the number and type of employees it has, the amount that qualifies as wages, or the health insurance premiums paid to employees who are eligible. If you want a more detailed explanation, read the above article.

How to claim your 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).

Employers must submit quarterly reports detailing the amounts of the tax credit, the wages paid and the health insurance premiums that they have claimed to be reimbursed.

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).

The last day for Form 941 in most cases is the last month following the end each quarter. Meanwhile, the deadline for Form 941-X is generally three years from the date that the original Form 941 was filled. The deadline can be two years after the date the tax was paid. However, the latter date is preferred.