Learn more about eligibility and how to apply in the latest NFIB webinar
On July 6, Senior Executive Counsel for the NFIB Small Business Legal Center Elizabeth Milito and Executive Director for the NFIB Research Center Holly Wade hosted a webinar about how to claim the Employee Retention Tax Credit (ERTC), also known as the ERC. They discussed how to determine if a business is eligible and the application process.
“The ERC is a tax program, and it can be a bit complicated with regards to determining whether you qualify and for what wages you will qualify for if you do qualify,” Milito explained. “For that reason, we strongly recommend that businesses work with either your payroll provider or a CPA.”
In the CARES Act of 2020, Congress created the ERTC to reward and encourage businesses to keep their employees on payroll during the COVID-related shutdowns. The ERTC aimed to incentivize employee retention by offering employers a quarterly credit for each qualified employee.
The ERTC has a maximum credit of $5,000 per employee in 2020 and $21,000 per employee in 2021. Employers can still retroactively take advantage of this credit against federal employment taxes on qualified wages paid to their employees from March 13, 2020, through September 30, 2021.
ERTC Eligibility
Eligibility rules changed from 2020 to 2021, as well as amount of wages available to claim. Eligible businesses or tax-exempt organizations that conduct a trade or business must have experienced one or both of the following criteria:
- The business was forced to partially or fully suspend or limit operations by a federal, state, or local governmental order.
- The business experienced a 50% decline in gross receipts during any quarter of 2020 versus the same quarter in 2019, and 20% decline in gross receipts in 2021 against the same quarter in 2019.
Milito went on to give step-by-step guidance on how to calculate the credit and shared success stories from owners who received the ERTC.
When calculating credit, all W2 wages can be included as qualifying wages, as well as tips reported in payroll. Wade explained how to maximize both the ERTC and the Paycheck Protection Program (PPP) during the second half of the webinar.
Claiming ERTC
Your ERTC claim will include total qualified wages and healthcare costs.
“It is a payroll tax credit and it is refundable,” Wade said. “If you withhold payroll taxes and you still have credit, they will send you a check.”
To claim the credit, start with these steps:
- Amend previously filed 941
- For each qualifiable quarter, fill out and submit a 941X
The ERTC was originally set to expire on January 1, 2022, giving employers the ability to claim it for all four quarters of 2021. However, in November of 2021 a bipartisan physical infrastructure law included a provision changing the ERTC’s timeframe to only apply for the first three quarters of 2021, and not Q4.
If the early termination of the ERTC is harmful to your business, please tell your Representative and Senators to support the ERTC Reinstatement Act and make this crucial credit available as planned.
Stay tuned for more information to join NFIB experts for the next webinar on August 3.
