Employee Retention Tax Credit Eligibility for Businesses

Employee Retention Tax Credit (ERTC) is a tax credit designed to help businesses retain employees during the COVID-19 pandemic. If your business was impacted by the pandemic and you meet certain criteria, you may be eligible to claim the ERTC. However, the application process is not as easy at it may seem. In this article, we’ll explore the ERTC eligibility criteria for businesses in detail, including the best ERC tax credit services to use to help ensure that the application is properly filed with the IRS.

To be eligible for the ERTC, a business must have experienced either a full or partial suspension of its operations due to government orders related to COVID-19 or a significant decline in gross receipts. A significant decline in gross receipts is defined as a decline of 20% or more compared to the same quarter in the previous year.

The amount of ERTC a business can claim depends on the size of the business and the amount of qualified wages paid to employees. For businesses with fewer than 500 employees, the ERTC is equal to 70% of qualified wages paid between MARCH 13th, 2020, and December 31, 2021, up to a maximum of $26,000 per employee. For businesses with more than 500 employees, the ERTC is equal to 50% of qualified wages paid during the same period, up to a maximum of $26,000 per employee.

The Employee Retention Tax Credit eligibility guidelines for businesses state that qualified wages are wages paid to employees during the eligibility period, including health plan expenses. For businesses with fewer than 500 employees, qualified wages include all wages paid during the eligibility period, regardless of whether the employee was working or not. For businesses with more than 500 employees, qualified wages only include wages paid to employees who were not working due to COVID-19-related reasons.

For a business to qualify for the ERTC, a business must also meet several other criteria. To help ensure that the complicated application process is filed correctly, we recommend using one of the leading ERTC services program providers. You can see reviews of the top employee tax credit companies here. The business must not be a state or local government or an organization affiliated with a state or local government & the business must not be a business that is shut down permanently.

It’s important to note that claiming the Employee Retention Tax Credit can be a complex process. To claim the credit, businesses must file IRS Form 941-x, the employer’s quarterly federal tax return. The credit is claimed on Line 11c of Form 941-x. Businesses can also use Form 7200, Advance Payment of Employer Credits Due to COVID-19, to request an advance payment of the ERTC.

If your business is eligible for the ERTC, it’s important to understand the potential benefits. The ERTC can provide a significant financial boost to businesses struggling to retain employees during the pandemic. The credit can be used to offset payroll taxes, and any excess credit can be refunded to the business.

In conclusion, the Employee Retention Tax Credit can be a valuable resource for businesses impacted by the COVID-19 pandemic. To be eligible for the credit, businesses must have experienced a full or partial suspension of operations or a significant decline in gross receipts. The amount of the credit depends on the size of the business and the amount of qualified wages paid to employees. 

Businesses must also meet several other eligibility criteria, including being in operation on January 1, 2021. Answers to frequently asked questions about the ERTC can help determine eligibility.  If your business is eligible for the Employee Retention Tax Credit, it’s important to understand the potential benefits and to seek professional advice to ensure that you are claiming the credit correctly.