Applying for the Employee Retention Tax Credit
If you’re a small business owner that has been able to successfully weather the storm brought on by the COVID-19 pandemic, hats off to you! Many small businesses were not nearly as fortunate, as an estimated one-third of small businesses have closed (permanently or temporarily) as a result of the pandemic. To be sure, there have been a slew of government assistance programs and credits designed to help business owners keep their doors open. One such example is the Employee Retention Credit. Interested in learning more? Read on…
What is it?
If you’re familiar with the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020, then you may be aware that the Employee Retention Credit was one of the programs introduced in the relief package to help small business owners. It was meant to provide incentives for employers to keep their existing staff on the payroll throughout 2020, when the coronavirus pandemic was in its early stages and the economic climate was dire. According to Thomson Reuters, the credit was originally worth 50 percent of an employees’ wages (up to $10K per year)—”a maximum credit of $5,000 for wages paid from March 13, 2020, to December 31, 2021.” Since its introduction, the credit has been increased from 50 percent to 70 percent, with a wage limit of $10K each quarter (rather than annually). This means you’re now able to claim up to $7,000 for each employee every quarter, or up to $28K per year, per employee.
Who is eligible?
As with any tax credit, there are eligibility requirements that need to be met. The Employee Retention Credit is available for private-sector employers or tax-exempt organizations that operated during 2020 and 2021, and “experienced an interruption of operations” due to COVID-19-related lockdown orders, or “experienced a significant decline in gross receipts during the calendar quarter” (according to Reuters).
So, what do we mean by “interruption of operations”? Sometimes referred to as “partially suspended,” this is something that could occur if a portion of your business had to close during the pandemic because of federal, state, or local orders. For instance, if you were a restaurant that had to temporarily stop serving food in your dining room but could continue to carry on with takeout orders or deliveries, your business operations would be considered “partially suspended.”
Even if you received a Paycheck Protection Program (PPP) loan, you’re still qualified to apply for this credit. To learn if you’re an eligible business owner, check out the Eligibility Tool offered on Thomson Reuters.
While the original Act ended in September 2021, eligible businesses are able to apply for the Employee Retention Credit through April 15th, 2024. It’s a complex process to be sure, which is why ARF Financial is doing everything possible to help small business owners submit their applications. Interested in applying? We can help! Just contact your current ARF Financial loan representative, or find your local ARF Financial loan consultant here.