ERTC - The Employee Retention Tax Credit - A Lifeline for Small Business Owners

Running a small business can be challenging, especially during difficult times like we are currently experiencing due to the COVID-19 pandemic. The Employee Retention Tax Credit (ERTC) is a valuable tax credit for small business owners that can provide some much-needed relief. The ERTC has been a lifeline for many small businesses that are struggling to keep their doors open and retain their employees.

What is the ERTC?

The Employee Retention Tax Credit (ERTC) is a refundable tax credit that was created as part of the CARES Act in March 2020. The credit is designed to help small and medium-sized businesses retain their employees during the COVID-19 pandemic.

How does the ERTC work?

The ERTC allows eligible employers to claim a tax credit against the employer's portion of Social Security taxes. For the first three quarters of 2021, the maximum credit amount is $7,000 per employee, per quarter, for a total of $21,000 per employee for the year. Eligible employers can also claim the credit for qualified wages paid from March 12, 2020, through December 31, 2021. Free ERTC calculator

Who is eligible for the ERTC?

Eligible employers can claim the ERTC if they experienced a significant decline in gross receipts or were fully or partially shut down due to COVID-19. Employers must also have had an average of 500 or fewer full-time employees in 2019. Nonprofit organizations are also eligible for the credit.

What are qualified wages?

Qualified wages are wages paid to employees during the period of eligibility. The wages must be paid to employees who are not working due to the COVID-19 pandemic or whose hours have been reduced. For employers with 500 or fewer employees, all wages qualify for the credit. For employers with more than 500 employees, only wages paid to employees who are not working due to the pandemic qualify.

In conclusion, the Employee Retention Tax Credit (ERTC) has been a crucial lifeline for small businesses during the COVID-19 pandemic. If you are a small business owner, it is essential to take advantage of the ERTC to help retain your employees and keep your business afloat. Remember, the credit is retroactive, so even if you did not claim it last year, you can still claim it for 2020. If you need help understanding the ERTC or how to claim the credit, reach out to a qualified tax professional who can guide you through the process.