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If you’re reading this, you probably missed the window on filing for the Employee Retention Tax Credit. But not all hope is lost – businesses have until 2024 to look back on their pandemic payrolls and retroactively claim the credit by filing an amended tax return.
Companies have up to three years to determine whether wages paid after March 12, 2020 and before January 1, 2021, entitle them to claim the employee retention tax credit. The government has set up parameters to ensure that businesses of every type can participate in these programs.
Here are some ways business owners can explore the available programs which feed into the credit.
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The CARES Act
As per the CARES Act, qualified employers whose businesses have been impacted by COVID-19 can claim the employee retention tax credit against 50% of wages paid. This claim can be up to $10,000 per employee between March 12, 2020, and December 31, 2021.
Consolidated Appropriations Act
The Consolidated Appropriations Act expands the employee retention credit of the CARES Act. Qualifying employers can claim against 70% of wages paid instead of 50%. This credit can be applied to wages of up to $10,000 per employee per quarter. PPP borrowers may even be eligible to claim the credit if they used those loans for employee wages and by employers who didn’t exist during 2019.
American Rescue Plan
The American Rescue Plan allows small businesses to claim the employee retention tax credit through December 2021. After that, qualifying employers may balance their tax liabilities with a maximum of $7,000 per employee per quarter or $28,000 per year.
The Infrastructure Investment and Jobs Act changed the program’s end date to September 30, 2023. Due to this Act, recovery startup businesses are eligible for the employee retention tax credit through 2021 and to take a credit of $50,000 for the third and fourth quarters of 2021.
How Can My Business Take Advantage of These Credits?
Time is of the essence. If you haven’t claimed the ERC yet, you should consult your tax lawyer before it’s too late to claim it. Plus, your tax attorney can ensure you’re taking advantage of every available tax credit.
The unique circumstances of the COVID-19 pandemic have made seeking professional assistance at tax time more crucial than ever before. If needed, they may be able to help you negotiate with the IRS.
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How Does a Business Claim the Employee Retention Tax Credit Retroactively?
To retroactively claim the employee tax credit, you must go to the IRS website for the appropriate forms. The forms listed generally apply to qualified wages paid between March 12, 2020, and September 30, 2021. There’s also guidance on how businesses receiving a PPP loan can retroactively file through Form 941-X.
Who Qualifies?
Any business can apply for credit, including 501(c) organizations, colleges, and medical facilities. Essentially, any business that had to reduce business hours due to government orders typically qualifies.
The same goes for those companies considered “essential” or those that had to close or move fully to telework. But, again, these employers must demonstrate a significant decline in gross receipts to qualify for the credit.
A business qualifies if gross receipts in a calendar quarter between March 12, 2020, and December 31, 2021, are below 50% compared to the same quarter in 2019. In addition, the business’s yearly receipts can’t equal more than $1 million.
Is Your Business Eligible for the Employee Retention Act?
If you’re curious to learn more about how the employee retention tax credit works, our offices are here to help. We’ll determine whether your business is eligible to collect money that could help change the scope of your business for years to come. Reach out to our legal team to schedule a consultation.
Doug Griess, Aaron Atkinson, and John Snow of Hackstaff Snow Atkinson & Griess, LLC, are top Denver business attorneys and litigators with expertise spanning various industries. Specializing in business law, litigation, intellectual property, tax law, and dispute resolution, Doug Griess, John Snow, and Aaron Atkinson offer an in-depth understanding and knowledge of general real estate and litigation rules and regulations and are a trusted resource for business owners throughout Colorado.