One of the most important changes in the law is that the Employee Retention Tax Credit (ERTC) is now available to employers who previously received or will receive a Paycheck Protection Program (PPP) loan. 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. 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. In addition, since the beginning of the ERTC program, several laws have come into effect that affect the way in which credit can be applied for.
Consequently, it is important to ensure that all eligible expenses, including non-payroll costs, such as utility, rent and operating expenses, to name a few, are included in PPP loan forgiveness applications to maximize the qualified salaries available to ERTC. 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. The early termination of the ERTC means that companies must return withheld payroll taxes to monetize their early credit, advised Marvin A. Basically, if they are considered to be majority owners, their salaries are not salaries that qualify for the ERTC.
The IRS has also clarified that tips can be considered qualified wages for ERTC purposes, as long as they are Medicare salaries. Employers cannot apply to the same employee for the ERTC credit and the work opportunity tax credit during the same period, nor can they claim the same salary under the ERTC and the employer credit in section 45S for the Family and Medical Leave Act (FMLA). The ERTC is a refundable credit that companies can apply for on qualified salaries, including certain health insurance costs, paid to employees. The expanded employee retention tax credit (ERTC) provides positive relief to companies and organizations most affected by the global pandemic.
Eligible employers with fewer than 500 full-time employees can also request early payment from the ERTC using IRS Form 7200. A financial professional can also help you ensure that you don't apply for the same payroll for both PPP and ERTC loan forgiveness. Therefore, eligible companies that didn't initially apply for their ERTC could do so until 2024, depending on when they originally filed or paid their business taxes. The ARPA, for example, allows small employers who received a Paycheck Protection Program (PPP) loan to also apply for the ERTC.
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