How Chicago, IL Businesses Apply for Employee Retention Tax Credit
As businesses in Illinois continue to recover from the economic challenges that resulted from COVID-19, it is crucial for business owners to be aware of available federal relief programs. Among these is the Employee Retention Credit (ERC). The ERC is a chance for eligible businesses to recoup some losses that they incurred during the pandemic. In this article, we will provide a detailed roadmap on how Chicago, IL businesses can apply for the Employee Retention Credit.
Understanding the Employee Retention Credit
The Employee Retention Credit is a provision established under the CARES Act that had a purpose of encouraging businesses to retain their workforce during periods of economic hardship. The program is similar to the Payroll Protection Program (PPP), yet different in certain regards. And, businesses that received PPP can receive ERC.
The ERC allows eligible employers to receive a percentage of wages paid to employees who were not working during specific periods of the pandemic due to a significant decline in business activity or a full or partial suspension of business operations. The ERC is a tax credit issued to businesses for affected periods. Unlike the PPP where funds had to be used for specific purposes, businesses that are approved for ERC will receive tax credit funds to use at their discretion.
ERC Eligibility Criteria
To apply for the ERC, Chicago businesses must first meet specific ERC qualification criteria. These requirements include:
- A decline in gross receipts of at least 20% when compared to the same quarter in the previous year. This eligibility criterion remains in effect until gross receipts recover to 80% or more of the corresponding quarter in the prior year.
- A partial or full suspension of operations due to government orders requiring businesses to modify their business operations, business travel, or business gatherings because of COVID.
ERC Application Process
Chicago businesses can follow these steps to apply for the Employee Retention Tax Credit:
- Seek professional assistance from an ERC specialist or account firm.
- Calculate the credit amount and determine the maximum credit.
- Complete the necessary sections of Form 941, the Employer’s Quarterly Federal Tax Return and submit to the IRS.
- Maintain all documentation.
Conclusion
The Employee Retention Credit presents a significant opportunity for businesses to alleviate some of the financial strains imposed by the pandemic. By understanding the eligibility criteria and following the application process diligently, businesses can leverage this tax credit. Unlike the Payroll Protection Program (PPP) businesses can use the funds from the tax credit for whatever purpose they choose for their business operations.
Given the intricacies of tax laws, it is highly recommended to consult with an accountant that is knowledgeable on ERC, or use the services of a professional ERC specialist. This will help to ensure accurate calculations and a smooth application process and eliminate future questions or audits from the IRS.
When applying for ERC, it’s important for Illinois businesses to provide accurate information on qualified wages and the number of eligible employees. After submitting documents to the IRS, it is essential to retain proper records that support eligibility and the claimed amount of credit. This includes payroll records, financial statements, and documentation showcasing the decline in gross receipts or government-issued orders.
If you have more questions about ERC you can refer to our ERC FAQs. Or if you have a business in Chicago and would like to know more about how to apply for the Employee Retention Credit (ERC), contact us today at 919-609-2714. We’re happy to help!
As businesses in Illinois continue to recover from the economic challenges that resulted from COVID-19, it is crucial for business owners to be aware of available federal relief programs. Among these is the Employee Retention Credit (ERC). The ERC is a chance for eligible businesses to recoup some losses that they incurred during the pandemic. In this article, we will provide a detailed roadmap on how Chicago, IL businesses can apply for the Employee Retention Credit.
Understanding the Employee Retention Credit
The Employee Retention Credit is a provision established under the CARES Act that had a purpose of encouraging businesses to retain their workforce during periods of economic hardship. The program is similar to the Payroll Protection Program (PPP), yet different in certain regards. And, businesses that received PPP can receive ERC.
The ERC allows eligible employers to receive a percentage of wages paid to employees who were not working during specific periods of the pandemic due to a significant decline in business activity or a full or partial suspension of business operations. The ERC is a tax credit issued to businesses for affected periods. Unlike the PPP where funds had to be used for specific purposes, businesses that are approved for ERC will receive tax credit funds to use at their discretion.
ERC Eligibility Criteria
To apply for the ERC, Chicago businesses must first meet specific ERC qualification criteria. These requirements include:
- A decline in gross receipts of at least 20% when compared to the same quarter in the previous year. This eligibility criterion remains in effect until gross receipts recover to 80% or more of the corresponding quarter in the prior year.
- A partial or full suspension of operations due to government orders requiring businesses to modify their business operations, business travel, or business gatherings because of COVID.
ERC Application Process
Chicago businesses can follow these steps to apply for the Employee Retention Tax Credit:
- Seek professional assistance from an ERC specialist or account firm.
- Calculate the credit amount and determine the maximum credit.
- Complete the necessary sections of Form 941, the Employer’s Quarterly Federal Tax Return and submit to the IRS.
- Maintain all documentation.
Conclusion
The Employee Retention Credit presents a significant opportunity for businesses to alleviate some of the financial strains imposed by the pandemic. By understanding the eligibility criteria and following the application process diligently, businesses can leverage this tax credit. Unlike the Payroll Protection Program (PPP) businesses can use the funds from the tax credit for whatever purpose they choose for their business operations.
Given the intricacies of tax laws, it is highly recommended to consult with an accountant that is knowledgeable on ERC, or use the services of a professional ERC specialist. This will help to ensure accurate calculations and a smooth application process and eliminate future questions or audits from the IRS.
When applying for ERC, it’s important for Illinois businesses to provide accurate information on qualified wages and the number of eligible employees. After submitting documents to the IRS, it is essential to retain proper records that support eligibility and the claimed amount of credit. This includes payroll records, financial statements, and documentation showcasing the decline in gross receipts or government-issued orders.
If you have more questions about ERC you can refer to our ERC FAQs. Or if you have a business in Chicago and would like to know more about how to apply for the Employee Retention Credit (ERC), contact us today at 919-609-2714. We’re happy to help!
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