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How San Francisco, CA Businesses Apply for Employee Retention Tax Credit

As businesses in California strive to get back to normal after the devastating impact of the coronavirus pandemic, it’s important for business owners to be aware of resources made available by the government. The Employee Retention Credit (ERC) is one such program that has been in the news recently. Similar to PPP or the Payroll Protection Program, ERC offers eligible businesses financial relief for quarters during the pandemic that their business suffered. In this article, we will provide a step-by-step guide on how San Francisco businesses can apply for the Employee Retention Tax Credit.

Understanding the Employee Retention Credit

ERC was originally created by the federal government under the CARES Act. The program was designed to provide a tax break to businesses that struggled, but were able to maintain their workforce during these times of economic hardship. This tax break is a credit for a portion of wages paid to employees who remained employed but could not work due to a reduction of business activity or at least a partial operational shutdown.

ERC Eligibility Criteria

To qualify for the ERC, San Francisco businesses must meet specific criteria, including:

  1. Having had a drop of at least 20% in total sales compared to the same quarter in the previous year. 
  2. Having had business operations partially or fully shut down due to government orders. 

ERC Application Process for California Businesses

San Francisco businesses can follow these steps to apply for the Employee Retention Credit:

  1. Seek guidance from an ERC specialist. Given the complexity of tax laws and the filing process, it is highly recommended to consult with a tax professional or accountant that is well-versed in ERC to ensure accurate calculations and a seamless application process.
  2. Determine the business’s maximum tax credit by calculating 70% of qualified wages paid to each eligible employee per quarter during specific pandemic quarters.
  3. Complete or adjust the necessary sections of Form 941 (the Employer’s Quarterly Federal Tax Return), providing accurate information regarding qualified wages and the number of eligible employees. File Form 941 with the IRS.
  4. Keep all supporting documentation to substantiate your eligibility in case the IRS requests copies in the future. These records may include payroll records, financial statements, and documentation showing the decline in gross receipts or government-issued orders.

Conclusion

The pandemic was hard on everyone, especially small business owners. The Employee Retention Credit is an opportunity for businesses to get back some of the money they lost while working to retain their valuable employees during those difficult times. All small businesses in San Francisco, even those that received PPP, should consider applying for the Employee Retention Credit. It’s important to understand the eligibility criteria and follow the application process carefully to be sure a business qualifies and can file and receive the tax credit. 

The process of determining eligibility, calculating the maximum credit and filing with the IRS is extremely complex. While it may be possible to file for ERC on your own, it’s highly recommended to use an accountant or ERC specialist that is very experienced in the Employee Retention Credit program.

If you have a business in California and are looking for a top ERC specialist, you can find some great options here on ERCTaxCreditReviews.com. If you have questions, refer to our ERC FAQs or call us 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:

  1. 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.
  2. 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:

  1. Seek professional assistance from an ERC specialist or account firm. 
  2. Calculate the credit amount and determine the maximum credit.
  3. Complete the necessary sections of Form 941, the Employer’s Quarterly Federal Tax Return and submit to the IRS.
  4. 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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