When the COVID-19 pandemic pushed businesses to their breaking points, the government introduced initiatives to help companies stay afloat. The Employee Retention Credit (ERC), in particular, has been an important tool for businesses of all sizes. You can learn more about this tax credit with an online search right now.
What Is The Employee Retention Credit Program?
To support struggling businesses and employees during the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act introduced retention credits. These tax credits encourage companies to retain their employees, despite overwhelming economic difficulties.
Available to businesses of all sizes, the retention credit can be calculated based on wages paid to employees during a particular period.
How Do Retention Credits Work?
The process is pretty straightforward. The credit is calculated at 50% of the wages paid to each employee, with a yearly cap of $10,000 per employee. Therefore, a potential credit of up to $5,000 per employee per year is available to qualifying businesses.
These credits offset a company’s liability for Social Security taxes and reduce their obligations in a significant way. However, the big question for many businesses refers to their eligibility.
Is Your Business Eligible?
There is specific eligibility criteria for any business that wishes to qualify for the retention credit. Your company may be eligible if:
- The business was operational on or before March 12, 2020,
- The business was dealt a massive decline in gross receipts (which is a reduction of 50% or more when compared to the same quarter of the previous year.
- The business demonstrated a commitment to keep its employees and continue paying wages during this period.
Companies who meet these requirements should have no issue qualifying for the retention credit and the financial support it brings.
Employee Retention Credit 2023 Application
If your business meets these requirements and you’re looking to apply for employee retention credit in 2023, the claiming process is simple. Employers can claim the ERC by filing out Form 941 on their taxes.
If you’re just learning about retention credits in 2023, there’s no need to panic. You can claim the ERC retroactively up to three years after the original payroll taxes were due. Therefore, employers can take advantage of this credit until 2024 and, in some cases, 2025.
Long-Term Benefits of The Retention Credit
This extended opportunity to recoup financial losses suffered during the pandemic can make a huge difference to your company. Since qualifying businesses can receive up to $28,000 per employee, that cash infusion can be distributed in many ways.
First and foremost, it can save the business and the jobs of everyone who makes it profitable. Secondly, it can increase the company’s cash flow, allowing it to rebound from financial uncertainty.
Finally, this financial tool can boost the morale of employees, making them feel secure in their roles and more productive as a result. The retention credit can not only help a business weather the storm, but thrive for many years to come.
Don’t Miss Out!
To squeeze the most out of this retention credit before it’s gone, you should speak with a financial professional. An accountant or tax authority can help you understand the eligibility requirements and the calculation of the credit.
This professional can also guide you through complex tax regulations and help you compile essential documentation. As a result, businesses can reduce their tax liabilities and secure the maximum financial support they are entitled to.
In order to make this process easier, keep accurate records of your employees’ wages and your business’ gross receipts. That way, whether you work with a financial professional or not, you will have your documentation organized.
Don’t miss out on this incredible source of savings!