The ERTC is a refundable payroll tax credit for salaries paid by an employer whose company is totally or partially suspended due to an order related to COVID-19 or who is experiencing a decrease of at least 10 percent in gross income compared to it. calendar quarter of the previous year. The ERTC is a payroll tax credit (not an income tax credit) and will ultimately be reported on Form 941. Since the ERTC is a refundable tax credit (rather than a non-refundable or partially refundable tax credit), it means that any qualifying company can access the full amount of the credit regardless of income or other tax liabilities. The ERTC is available for companies of all sizes: there is no limit to the number of employees, although it is easier for small businesses to take advantage of it.
Eligible salaries under the ERTC for an eligible employer that is not considered a small employer are the salaries and health insurance benefits paid to an employee who is not providing services due to the effects of the pandemic. By now, most companies have heard of or even applied for employee retention tax credits (ERTC) or a PPP loan. The IRS has also clarified that tips can be considered qualified wages for ERTC purposes, as long as they are Medicare salaries. In any calendar quarter in which the ERTC amount exceeds the OASDI taxes imposed on the employer, the franchise is considered a refundable overpayment.
ERTC eligible salaries for a small employer are all salaries and health insurance benefits paid to an employee during the period in which the employer is considered an eligible employer. As stated in Accounting Today One of the most important issues being discussed by the IRS, Congress and the AICPA are the millions of companies that are being attacked by tax credit companies seeking to help them apply for the Employment Withholding Tax Credit (ERTC). Eligible employers can apply for the ERTC by calculating the ERTC amount for a pay period and reducing the required payroll deposit by that amount. The new guidance explains that the election is made simply by not claiming the ERTC for those specific salaries in the corresponding 941 return.
The employee retention tax credit (ERTC or ERC) was created as part of the CARES Act to encourage companies to continue paying employees by providing a credit to the eligible employer for salaries paid to eligible employees. Unlike tax deductions that reduce a company's taxable income, the ERTC tax credit is subtracted from the amount of tax owed by a qualifying company. While budgets are always tight, it's a good idea to invest in professional help from a qualified CPA or other tax professional to help you determine exactly how the ERTC fits your unique business and business plan.