Did you know businesses can still get an Employee Retention Tax Credit (ERTC) for retaining employees during the COVID-19 pandemic? ERTC was designed to encourage companies to keep their employees on payroll and retain them until the economy recovers and businesses that have yet to take advantage of the tax credit still have time – even up until 2025 to file amended tax returns.
With an ERTC calculator, employers can estimate the ERTC amount they are eligible for and plan their budget accordingly. Despite ERTC being a great initiative for businesses, employers must meet specific requirements and conditions to qualify for ERTC.
Qualifying for ERTC:
Employers are eligible for ERTC if their operations have been partially or fully suspended due to COVID-19 or if their gross receipts declined by more than 50% in 2020 (or more than 20% in 2021) compared to the same calendar quarter in 2019. ERTC is available for employers of any size, including non-profits. To qualify, employers must meet specific requirements, such as retaining employees, maintaining payroll levels, and providing ERTC-eligible wages.
Eligible ERTC Wages:
ERTC-eligible wages are paid to each W2 employee for services performed throughout most of 2020 and 2021. Total refunds of up to $26,000 per employee are available for qualified businesses who paid qualified wages during this time frame. ERTC-eligible wages include commissions, bonuses, and other compensations related to employment.
It is important to note that eligibility for ERTC extends beyond traditional, direct forms of compensation and that even unpaid and/or furloughed employees, during a business’s eligibility period, may qualify if an employer only incurred healthcare-related expenses.
Utilizing ERTC Calculator:
Employers can use the ERTC calculator to calculate the amount they are eligible for. They often consider suspension of operations, the number of employees receiving eligible wages, the number of quarters a business gross receipts declined, whether a business took a PPP loan and may even calculate ERTC-covered expenses, and ERTC credits per quarter.
What are the benefits of ERTC?
1. Increase the availability of resources for businesses:
Organizations can use the tax credit to help fund salary increases, hiring and training costs, bonus payments, and other expenses. This gives businesses additional resources to invest in their employees without finding the money to cover these costs themselves.
2. Reduced tax liability:
Businesses can claim the ERTC on their taxes, significantly reducing their overall tax liability. This can provide them with much-needed financial relief in times of economic hardship.
3. Improved employee satisfaction:
Organizations can use the ERTC to give their employees a raise or other extra compensation, which can help retain existing staff and attract new talent. Employees who felt valued, respected, and compensated fairly are more likely to be productive and loyal.
4. Improved employee morale and loyalty:
Investing in employees by offering bonuses or raises is an effective way to retain high-performers, attract quality talent, and ensure loyal staff members feel valued.
5. Improved customer satisfaction:
Companies that invest in their employees are more likely to experience higher customer service and satisfaction levels, which can increase profits.
6. Improved productivity:
Rewarding employees with bonuses or raises can improve morale and productivity, as staff members are more likely to feel motivated when they are recognized for their hard work.
The Employee Retention Tax Credit is an essential tool for businesses looking to recover from the COVID-19 pandemic, allowing them to continue to invest in their most valuable asset, their people.