Scam Employee Retention Credit

Many businesses and organizations have faced unprecedented hardships and challenges as a result of the COVID-19 pandemic. Lockdowns, social distance, health and security measures and lockdowns have caused many employers to face reduced revenue, increased expenses and disruptions in their operations.

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 explain what the ERC is, how it works, and how to claim it for different time periods and eligibility criteria.

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? Scam Employee Retention Credit

Employee Retention Credit is a tax credit that can be refunded to businesses and tax-exempt organizations who had employees 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’s goal is to encourage employers during a crisis to continue to employ their workers, and to offer them health coverage.

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 the limit vary depending on the time period for which the credit is claimed. 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 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. Scam Employee Retention Credit
The credit is fully refundable, meaning that if the amount of the credit exceeds the employer’s payroll tax liability, the excess will be paid to the employer as a refund.
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. Employers who are considered to be recovery startup businesses may also claim this credit, but only for 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.

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

Criteria for Eligibility

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

The employer’s business or organisation was suspended in whole or in part by a government decree due to the COVID-19, during a quarter calendar of 2020 or 21
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.

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 restricts commerce, travel or group meetings because 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

These are some examples:

Orders to stay at home that prevent non-essential companies from operating
Certain businesses are subject to curfews which limit their hours of operation
Capacity limits that reduce the number of customers or clients that can be served by a business
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 nature and extent of the order, and its impact on the operation of your business
The length, frequency, and timing of the order in relation to the quarters of the year.
The order’s impact on revenues and expenses

Revenue Decline

It is considered a significant decrease in gross revenue if a business has:

The gross receipts from any quarter in 2020 is less than 50% its gross receipts from the same calendar quarter in 2019.
The gross revenues for any calendar-quarter in 2021 will be less than 80 percent of the gross revenue in 2019 for that same quarter.

Gross receipts are the total sums that an organization or a business has accrued or received from all its sources in a given accounting year, without any deductions. Gross receipts are:

Sales of goods and Services
Rents, dividends, and annuities are examples of income streams that include interest, dividends.
Donations, contributions, grants and gifts Scam Employee Retention Credit
Membership fees and dues
Gross revenue from businesses or trades

To compare gross receipts between different quarters of the year, employers must use:

The same method of account (cash, accrual or accrual) was used in filing the federal income tax return.
For 2019 and 2020/2021, the same quarters of the calendar year that were used for filing federal employment tax returns on Form 941.
The same sources of income that it reported on its federal income tax return for 2019

Recovery Startup Business

Recovery startup businesses are those that:

Start any new business or occupation after February 15, 2019,
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

If a business is in recovery, it can still qualify for ERC even if the business has been suspended or its revenue has declined. Recovery Startup Businesses are still subject to some restrictions and special rules.

Maximum credit per quarter: $50,000
The credit will only be available to employees who have paid wages in the third quarter and fourth of 2021
Credits for recovery startups are subject to a maximum of $250 million.

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

Credit Amounts Calculation

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

How much of the employer’s income was affected in 2019 by the pandemic.
The number of employees that the employer has in 2019 or 2020/2021 and whether or not they worked during the pandemic
How much did the employer pay each employee in health insurance?

To claim the ERC, the employer must fill out and submit a form to the IRS. The employer has to fill out the forms and show how much he paid his employees, as well their health insurance, to qualify for ERC. The IRS will check the forms and give the money to the employer. The employer could use this money to pay health insurance for employees or to get refunds and credits for payroll taxes.

ERCs are 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 also has to use the money wisely and not waste it. Scam Employee Retention Credit

Below you will find detailed information on ERC, including the amount of credit and the calculation.

Time Period

Different laws introduced, amended and terminated the ERC in 2020, 2021 and 2022. The credit amount depends on the period for which you claim it. The following table summarizes and compares the ERC’s main features for each 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 of employees affects the definition and calculation of qualified wages and health insurance costs 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 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 and Health Insurance Costs

Qualified wages refer to wages paid during a period when the business is suspended or revenues are declining. The list of qualified wages includes tips, bonuses, commissions, and severance payments, as well as sick leave, family leave, severance, and other compensation. Qualified salaries also include the costs of providing health coverage to eligible workers, including premiums, copays, deductibles, and coinsurance.

The size of an employer’s business and the period in which they operate will determine the definition and calculation for qualified wages and health care costs. This table summarises the rules and provides examples for various scenarios. Scam 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 < <

Claim the Credit and Report It

The Internal Revenue Service (IRS) requires that employers claim the Employee-Retention Credit by filing a federal income tax return, Form 941, or a modified employment tax form (Form941X), with them. The employer will need to declare the qualified wages paid and the health insurance expenses paid for eligible employees. They must also report the credit claimed.

Form 941

Form 941 allows employers to declare their quarterly federal taxes, including income taxes, Medicare and Social Security tax. The employer can also claim the ERC in Form 941 for future or current quarters. The employer can use Form 941 to:

ERC reduces the amount that employers must deposit with the IRS in order to pay taxes.
The employer can request an advanced payment of the ERC credit if it exceeds taxes that they have to deposit. Scam Employee Retention Credit
Carry over any excess credit into the following quarter

To fill out Form 941 correctly and avoid common errors, the employer should:

Use the newest version of the Form 941, which reflects changes to laws that impact the ERC.
For calculating and reporting your ERC, follow the IRS’s instructions and worksheets.
Use Line 1c to report on the health insurance and wages that eligible employees have received.
Use Line 13d to report the amount of credit claimed for each quarter
Line 13f is used to report any advance payment of credit received by 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 and date Form 941, attaching any supporting documents, schedules, or schedules.

Some tips and resources for filling out Form 941 are:

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.
If you need clarification or assistance, contact the IRS or an accountant.

Form 941-X

The Form 941X can be used to make corrections or adjustments on an earlier Form 941. The Form 941X allows the employer retroactively to claim ERC for previous quarters. Form 941-X can be used by the employer to: Scam Employee Retention Credit

Claim the ERC to get a refund of taxes that you have overpaid.
Report additional qualified earnings and health benefits paid to eligible employee that weren’t reported on Form 941.
The amount of credit claimed will be affected by any mistakes or omissions in Form 941.

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

Use the latest version 941-X to reflect the updated laws and regulations that impact the ERC.
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 of Form 941 to explain why it is being amended or corrected
Use Line 24 for any additional qualified wage and health insurance expenses paid to eligible workers
Use Line 25 for any additional credit claimed each quarter.
Use Line 26 to report any credit or refund due to the ERC claim.
Sign and date Form 941, and attach any supporting documentation or schedules

Some tips and resources for filling out Form 941-X are:

For each quarter to be adjusted or corrected, you must submit a different Form 941X. Scam Employee Retention Credit
You should fill out Form 941/X as quickly as possible after you have made an adjustment or discovered an error.
Updates, FAQs, and guidance about Form 941X and ERC can be found on the IRS website.
If you need clarification or assistance, contact the IRS or an accountant.

Deadline and Statute of Limitations

The deadline for filing Form 941 is generally the last day of the month following the end of each quarter. For example for Q1 (2021) (January – March), Form 941 should be submitted by April 30, 2019. 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. The following quarter. For example, for Q1 2021 (January-March), Form 941 is due by May 10, 2021, Scam 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 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.

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

Conclusion

Employee Retention Credit is a valuable tax credit that can assist employers affected by the COVID-19 Pandemic to keep their employees and reduce the impact on their business or organization.

The ERC can be claimed by filing Form 941 or Form 941-X with the IRS and reporting the qualified wages and costs of health insurance paid to eligible workers. The ERC credit can be claimed with IRS Forms 941 or 941X by reporting to them the qualified health insurance and wages costs as well as the amount claimed each quarter.

Don’t miss this chance to get a tax break if your employer meets the ERC criteria. 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 can help your business or organization retain workers, maintain cash flow and recover from a pandemic. We hope that this article helped you to understand more about ERC and the claim process. Stay safe and thank you for reading.

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

Scam Employee Retention Credit

What is the ERC?

Employee Retention Credit – This tax credit is available to employers for keeping their employees employed during the COVID-19 epidemic.

The CARES Act, passed by Congress in March of this year, was amended in December of that year by the CAA Act. In March 2021, the ARPA Act (American Rescue Plan Act of 2021), was extended.

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.

Below are some details about eligibility.

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.
These businesses are recovery startups that have been in operation since February 15, 2020. They also generate gross revenues of no more than $1 million on average per year.

How much does the ERC cost?

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

Some of these factors include the time period, the number of employees, the number of qualified wages, and health insurance costs paid to eligible employees. If you want a more detailed explanation, read the above article.

How to claim ERC

To claim the ERC, an employer must file a federal employment tax reform or an adjusted employment tax return (Form 941-X) 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 for Filing the ERC Forms?

The deadlines of Form 941, Form 941X and ERC 941 are different.

Form 941 deadline is typically the last of the month following 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.