North Dakota Employee Retention Credit

COVID-19 has caused hardships and unprecedented challenges for businesses and organizations all over the world. Many employers have experienced reduced revenues, higher expenses, and disruptions to their operations because of lockdowns, distancing from social media, and health-and-safety measures.

The Employee Retention Tax Credit (ERC) is a refundable credit that employers can use to offset payroll costs.

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 provide an overview of the ERC and its workings, as well as how to apply for it in different time periods.

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 Employee Retention Credit (ERC)? North Dakota 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 was established by the CARES Act of 2020 and extended and modified in subsequent legislations in 2021 and in 2023. The ERC encourages employers to maintain their workers and to provide health benefits to them during the crisis.

Main Features & 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 credit limit and percentage are dependent on the period of time for which you claim the credit. For 2020, the percent is 50%, and the limit is $5,000 for each employee per 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. North Dakota Employee Retention Credit
The credit will be fully refundable if its amount exceeds that of the employer’s payroll taxes.
Employers can claim this credit if they experienced a significant decrease in gross receipts due to an order from the government relating to COVID-19. The credit can be claimed by employers who have been classified as recovery startups only until 2023.
Credits are available by submitting an amended employment return (Form 951) or by reducing deposits for employment taxes in anticipation. Employers can request an advance payment by submitting 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.

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 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 commerce, travel, or group meetings due to COVID-19
The order affects the operations of the business or organization
This order is applicable to any calendar quarter of 2020 or 2021

These are some examples:

Stay-at-home orders that restrict non-essential businesses from operating
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
Bans on travel or restrictions on the ability to transport goods or service by a business

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

The scope and nature of the order as well as how it impacts 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 revenue for any calendar-quarter in 2020 was less than 50 percent of the gross revenues for the same period in 2019.
The gross receipts for any calendar quarter in 2021 were less than 80% of its gross receipts for the same quarter in 2019

Gross receipts are defined as the total amount received or accrued by a business or organization from all sources during its annual accounting period without any deductions. Gross receipts consist of:

Sales of goods & services
Dividends (rents), royalties and interest
Contributions are gifts, donations and grants North Dakota 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 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 as reported in the federal tax return for 2019

Recovery Startup Business

A recovery startup business is a business that:

After February 15, 2020, you can start any business or trade.
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.

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

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

Credit Amount Calculation

The ERC has different rules and amounts for different periods of time and different types of employers. The main factors that affect the ERC are:

How much of the employer’s income was affected in 2019 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?

In order to receive the ERC from the IRS, the employer will need to complete some forms. The forms must include the total amount paid by the employer to employees, their health insurance coverage and the reasons why they are eligible for the ERC. The IRS will verify the forms, and then give the money to your employer. The employer can use the money to pay their employees and their health insurance or to get refunds or credits for their payroll taxes.

ERCs are not available forever. The ERC started in March 2020 and ends in September 2022. The employer must claim ERC before the expiration date or when it becomes unavailable. The employer must also spend the money properly and not waste any of it. North Dakota Employee Retention Credit

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

Time Period

The ERC has been introduced, modified, and terminated in different laws between 2020 and 2021. The credit amount depends on the period for which you claim it. The table below summarizes key differences and features of the ERCs 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

Number of Employees

The number employed affects how wages are calculated and defined, as well as the health insurance premiums for eligible employees. According to the time frame and number of full-time equivalents (FTEs), an employer can be classified as a small employer or large employer. The table below summarizes the rules and thresholds for determining employer size in 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)

Earnings and Costs of Health Insurance

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 wages include tips, commissions, bonuses, severance pay, sick leave pay, family leave pay, and other forms 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. The table below summarizes rules and examples in different scenarios. North Dakota 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

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Claim and Report 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 is required to report the qualified wages, health insurance costs and credit claimed by each quarter.

Form 941

Form 941 is a quarterly tax return that the employer must file to show his federal tax liabilities. This includes income taxes, Medicare tax and Social Security taxes. Form 941 allows employers to claim ERCs for current or future quarterly periods. 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.
You can ask for advance payment if your ERC exceeds the amount of taxes you have to pay. North Dakota Employee Retention Credit
Carry forward any excess credits to future quarters

The employer should:

Use the latest version of Form 941 that reflects the changes and updates made by the laws that affect the ERC
Use the IRS worksheets and instructions to calculate and report the ERC
Use line 11c to report qualified wages paid and health insurance premiums paid to eligible employees
Use Line 13d to report the amount of credit claimed for each quarter
Use Line 13f to report any advance payments of the credit received from the IRS
If you need to receive an advance payment, use Line 24.
Report any credit balance that may be carried forward into the next quarter using Line 25
Sign the form 941, and attach any supporting documents.

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

Use online services or electronic filing to submit Form 941 more quickly and securely
You can find updates, FAQs, and more information on the IRS site about Form 941, the 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 Form 941X allows the employer retroactively to claim ERC for previous quarters. Employers can use Form 941/X for North Dakota Employee Retention Credit

Claim refunds or credits for taxes overpaid due to the ERC
Report additional qualified wages paid and health insurance premiums paid to eligible workers that have not been reported on Form 941
You can correct any errors or omissions that may have affected the credit claimed amount on Form 941.

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.
The IRS has provided worksheets to help you calculate the ERC.
Use Part 2 to indicate which lines of Form 941 are being corrected or adjusted
Use Part 3 to explain the reason for a correction or adjustment on Form 941
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 to report any credit or refund due to the ERC claim.
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:

For each quarter to be adjusted or corrected, you must submit a different Form 941X. North Dakota Employee Retention Credit
After making a correction or finding an error, you should file Form 941X.
Check the IRS website for updates, FAQs, and guidance on Form 941-X and the ERC
Need clarification? Contact an IRS agent or tax professional.

Deadline and Statute of Limitations

Form 941 must be filed by the last date of the month that follows the end each quarter. For Q1 2021 (January-March), the Form 941 must be filed by April 30th, 2021. In the event that an employer has deposited the taxes due on time for a particular quarter, Form 941 can be filed by the 10th date of the following month. After the end of the quarterly period. For example, for Q1 2021 (January-March), Form 941 is due by May 10, 2021, North Dakota Employee Retention Credit

The deadline for submitting Form 941X is usually three years following the original date of Form 941 or two after the date on which the tax was paid. For example, Q1 2019 (January to March), Form 941 had to be submitted by April 30, 2019. If an employer submitted Forms 941 on 30 April 2020 and the tax was paid on 30 April 2020, it is now April 2023 before they can file Forms 941-X. If an employer filed form 941 on April 30 2020 and paid the tax by June 15, 2020, then the deadline to file Form 941-X will be 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 (Eligible Employees Credit) is a tax credit that can vary depending on the time frame, the number and type of employees employed, and the amount paid in wages and insurance to employees eligible for the credit. The ERC may be claimed through IRS Forms 941 and 941X, which require the employer to report the qualified wages paid and the health insurance expenses incurred by each employee.

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. It is important to file your forms quickly and correctly. This article provides tips and resources that will help you avoid common errors. If you need clarification or assistance, you can contact the IRS.

ERCs are a powerful tool that can help your company or organization, as well as your employees. You can use it to retain employees, keep your cash flowing, and recover after a 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.

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

North Dakota Employee Retention Credit

What is 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 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?

The ERC is not available to everyone. Employers who retained their employees and paid them wages between March 13, 2020, and December 31, 2021, are eligible.

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

A government order imposed a suspension (full or partial) on the business or organization 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.
You are a new business in recovery that has started operating after February 15th, 2020. Your average annual gross sales is no more than $1,000,000.

How much is ERC?

The amount ERC received by a business or organization will depend upon several 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. The article above provides a detailed explanation on how ERC is calculated.

How to claim ERC

To receive the ERC, employers must file with the IRS a Form 941-X (revised employment tax returns) or a Federal Employment Tax Reform.

The employer must provide a quarterly report detailing the wages, health insurance and other costs that are eligible for credit as well as the amount claimed.

When is the Deadline for Filing 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. In contrast, the deadline to submit Form 941 X is generally set at three years since the date of the original 941. It can also be from two years from the date that the tax was paid, with the later date being the more preferred one.