Find answers to questions about how to apply for the employee retention credit for COVID-19 related employee retention tax credits. The ERTC is a refundable credit that companies can apply for on qualified salaries, including certain health insurance costs, paid to employees. The IRS processes claims through Form 941-X. Talk to an accountant, who can help you understand the requirements, complete the form and maximize your claim.
Find a list of local certified public accountants (CPAs). Eligible businesses file their application by filing the amended quarterly payroll tax return 941-X with the IRS. This form must be filed within three years of the initial filing of the return, so that companies may have until 2024 to participate in the program. On July 6, Elizabeth Milito, senior executive advisor at the NFIB Small Business Law Center, and Holly Wade, executive director of the NFIB Research Center, hosted a webinar on how to apply for the Employee Retention Tax Credit (ERTC), also known as ERC.
They discussed how to determine if a company is eligible and the application process. Milito continued to give a step-by-step guide on how to calculate credit and shared success stories of homeowners who received the ERTC. Wade explained how to maximize both the ERTC and the Paycheck Protection Program (PPP) during the second half of the webinar. The ERTC serves as a lifesaver to help companies and eligible employers and their employees survive the waves of unexpected events that have gripped them in recent years.
A company may be eligible for ERTC under this provision, even if its revenues increased during the corresponding quarter. But companies could only apply for a forgivable loan from the Paycheck Protection Program (PPP) or the ERTC on the original bill, which meant that only a few of them could use the credit. According to the National Federation of Independent Business (NFIB), only 4% of small business owners are familiar with the ERTC program and many are wondering what the ERTC is. Eligible employers with fewer than 500 full-time employees can also request early payment from the ERTC using IRS Form 7200.
In addition, most of the notice reiterates the ERTC FAQs that were previously posted on the IRS website. If you haven't yet applied for PPP loan forgiveness, consider applying for non-payroll expenses to maximize the salary you can use to apply for your ERTC. The Coronavirus Aid, Relief and Economic Security Act (CARES) created ERTC to help companies keep employees on the payroll. Companies that wish to apply for the ERTC must report their total qualified salaries, as well as related health insurance costs, on their quarterly tax returns (Form 941 for most employers).
While the ERTC is a great tool to help struggling companies reduce their tax burden, it's still a bit difficult to take advantage of it. Consequently, if previously salaries were wrongly classified as qualified salaries for the ERTC, then amendments to 941 would be necessary to correct any unintentional errors. The IRS has also clarified that tips can be considered qualified wages for ERTC purposes, as long as they are Medicare salaries. It is important to note that companies cannot claim a payroll expense as an ERTC salary and as a forgivable payroll cost in the PPP waiver request.