Blog Introduction:

Running a business is a challenging task, especially during these volatile economic times. In the wake of the COVID-19 pandemic, small business owners have found themselves struggling to stay afloat. The good news is that they can avail themselves of various government-sponsored relief initiatives, such as the Employee Retention Tax Credit (ERTC).

Many small business owners are not aware of the ERTC's benefits, and it can be hard to understand this complex tax credit. In this blog, we will break down what the ERTC is, how it works, and how it can benefit small business owners.

What is the ERTC?

The Employee Retention Tax Credit (ERTC) is a form of relief offered by the United States Internal Revenue Service (IRS). This initiative provides incentives for eligible employers that retained employees during the COVID-19 pandemic. The ERTC offsets the costs of retaining employees and helps businesses to keep their workforce intact and operational.

How does the ERTC work?

The ERTC offers a refundable tax credit that qualifies for qualified wages paid between March 13, 2020, and December 31, 2021. It applies to companies that have faced financial hardship due to the COVID-19 pandemic. This credit is equal to 70% of qualified wages, with a maximum credit of $7,000 per employee per quarter. This means a total maximum credit of $28,000 per employee.

Who is eligible for the ERTC?

Small businesses that have been negatively impacted by the COVID-19 crisis are eligible for the ERTC. Companies that have seen a 50% decline in gross receipts from 2019 to 2020 can access this tax credit. The credit is available to businesses with fewer than 500 employees. Companies that received forgivable PPP loans can also benefit from the ERTC. Feel free to work with a free ERTC Calculator to estimate your credit.

How can small business owners claim the ERTC?

To claim the ERTC, small business owners need to file Form 941, the employer's quarterly federal tax return. If the ERTC credit exceeds the employer's 941 tax deposit, they can request the credit be paid in advance. The process can be challenging to navigate, and small business owners must consult with their accountant or tax professional to ensure they qualify for this credit.

Small business owners have had a tough year, and the ERTC provides a ray of hope in uncertain times. This powerful tax credit helps keep businesses afloat and retains employees. Small business owners should consider taking advantage of the ERTC to alleviate financial stress and take advantage of any relief in these unprecedented times. It's essential to work with a professional to ensure the ERTC is claimed correctly and accurately. By utilizing the ERTC's benefits, small business owners can keep their employees and company operational.