Applying for Employee Retention Credit
The application process for the Employee Retention Credit (ERC) can seem extremely daunting at first. Many employers don’t understand if they qualify, or how to even apply if they do. The process is not as difficult as it first seems, and we’re here to walk you through every step you’ll have to take.
A vast majority of employers qualify for the Employee Retention Credit. No employer is excluded from the ERC based on the type of business they are or where in the United States they conduct business. To qualify, you must have kept employees on the payroll during the coronavirus pandemic. You also must be able to pass the gross receipts test or prove that your business experienced a partial or full suspension due to governmental orders.
Determine Eligibility for ERTC
There are two ways to determine if you, as an employer, are eligible for the Employee Retention Credit. The first is what is called the gross receipts test. This test is used to determine if your business saw a significant decrease in revenue during the pandemic. The test changes slightly depending on what year’s receipts you are considering. For 2020. your gross receipts for any quarter must be less than 50% of what they were for the same quarter in 2019. For 2021. Your gross receipts for any quarter must be less than 80% of what they were for the same quarter in 2019.
The second way to be eligible for the ERC is to have experienced a suspension of business operations. This suspension is allowed to be either partial or full. However, there is one major caveat, the suspensions must have been caused by a governmental order. For example, a restaurant that was forced by the government to cease serving customers inside and could only offer takeout, would be eligible for the ERC.
Apply Using Qualified Wages
As an employer, you apply for the ERC using qualified wages. The amount of these wages will determine the size of the tax credit you receive. Qualified wages include cash, salaries, hourly wages, vacation pay, and healthcare expenses. Just about any taxable wages are going to be considered qualified wages when being used to apply for the ERC.
File Form 941-X
Form 941-X is the form used to claim the Employee Retention Credit. Form 941 is used to report income taxes, Social Security tax, or Medicare tax withheld from employee’s paychecks, as well as to pay the employer’s portion of Social Security or Medicare tax. Form 941-X is an amended version of this form, used to lower your taxes for quarters in which you were eligible for the ERC. Once you have filed form 941-X, you will receive the tax refund you are eligible for under the ERC.
Getting in Line with the IRS Faster
It is common knowledge that bureaucracy often moves at a snail’s pace, and the IRS is no exception. To speed up the process of receiving your ERC, it is very helpful to procure the services of an ERC specialist. This is a professional who is well versed in everything to do with the ERC. They know the process inside and out, as well as all of the rules and regulations regarding the ERC. If you want to receive the ERC as quickly as possible, there is no better way to ensure that happens than by hiring an ERC specialist.