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Check if your business is eligible or not? Eligibility & Claiming

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An employer, whose business is fully or partially suspended during the COVID-19 pandemic and even continued to pay employees between March 13, 2020 and December 31, 2021 can avail the benefits of ERC Tax Credit by filing an amended tax return. Stay tuned to know as an employer, whether you i.e. your business is eligible to claim the Employee Retention Credit or not.

ERC Tax Credit

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Table of Contents

An employer must know that the last to claim Employee Retention Credit for 2020 and 2021 is 24 April 2024 and 2025, respectively, ERC for 2020 and 2021 can be upto $10,000, the credit amount even depends on business size, whether you are large or small employer if your meet all eligibility criteria then you easily claim ERC TAX CREDIT on an original or adjusted employment tax return. 

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What is the ERC?

Employee Retention Credit is a refundable tax credit for large and small businesses who even had continued to pay the employee during the shutdown due to COVID-19 pandemic, it is designed by Internal Revenue Service to encourage business owners to pay their working staff regularly. 

Under the various acts of the Federal Government, an employer can claim the ERC, check out the listed points and learn all about it.

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CARES Act – 2020

  • An employer who qualifies, and even if he/she has a loan under the Paycheck Protection Program (PPP), he/she can claim 50% of wages of upto $10,000 paid to each employee between 13 March and 31 December 2020. 
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Consolidated Appropriations Act – 2021

  • An individual who qualifies for the Employee Retention Credit with PPP can claim a credit of 70% of wages of upto $10,000 paid to each employee between 1 January and 31 December 2021.

American Rescue Plan Act – 2021

  • A business owner can claim upto 70% of tax credit for wages paid from 1 January to 31 December 2022 just as like under the Consolidated Appropriations Act – 2021, additionally, Recovery Startup Businesses (RSBs) can claim ERC upto $50,000 for 3rd and 4th quarter of 2021.

ERC Tax Credit

Who can claim ERC?

As an employer, you can claim Employee Retention Credit if you meet any of the following criteria.

  • An employer who sustained a full or partial suspension of operating business due to COVID-19 pandemic as per order of the federal government.
  • If a business has faced a significant gross receipt between March 13, 2020 and December 31, 2021.
  • If an individual business qualifies as Recovery Startup Businesses (RSBs) in the third or fourth quarter of 2021.

Note: Business fall in the categories: Education

Government Contractors, Healthcare and Life Sciences, Hospitality and Retail, Industrial, Not-For-Profit, Professional Services, Real Estate and Construction and Technology can claim the ERC.

ERTC Amount 

The amount of Employee Retention Tax Credit depends on the number of employees and you have paid them during March 13, 2020 and December 31, 2021. As per number of employees, a employer is titled as small or large employer, small one is going to get enhanced benefits under the ERC regime, and large one will get tax credit only for the wages of upto $10,000 paid to employees for not providing services.

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Note: For 2020 and 2021 ERC, an employer with 100 and 500 or few full-time employees, respectively, is considered as an employer. Employees with 130 hours of service in the month are called full-time employees.

How to claim ERC Tax Credit?

If an individual’s business in US and meet all eligibility criteria to claim the 2020 or 2021 Employee Retention Credit, to claim to an employer has to amend his/her payroll taxes using the IRS Form 941x, to claim it you must have the following documents:

  • 2020 & 2021 941 Payroll Tax Forms
  • 2019, 2020, & 2021 Profit & Loss Sheets
  • 2020 & 2021 Payroll Summary Report
  • Monthly Healthcare Statement (If Any)

Once an individual has completed IRS Form 941x, he/she has to mail it to the nearest Department of the Treasury or IRS Submission Processing Center, which is located in either Ogden, Utah, or Cincinnati, Ohio.

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