Ready to Get Started?
Please give us a call or fill out our contact form and a member of our friendly team will be in touch.
We’re ready to help you today!
The Employee Retention Credit, or ERC, was passed as part of a package of business relief measures in the CARES Act, which was Congress' first response to the COVID-19 pandemic.
The tax credit was designed to encourage employers to keep their employees on the payroll, despite government-mandated closures and falling sales, and many companies took advantage of it—but some were also left out due to restrictions imposed by the law.
At the end of 2020, Congress updated the ERC, making it available to more companies for a longer period of time. So how will that impact your business and employee retention efforts?
According to the IRS, the Employee Retention Credit is open to companies and certain tax-exempt organizations that have experienced either a suspension of their operations due to governmental orders or a decline in gross receipts when compared to a certain quarter.
The refundable tax credit is applied against certain employment taxes equal to 50-70% of an employee's "qualified wages," up to $10,000 per employee. Employers can access the credit by reducing their payroll tax deposits or requesting an advance credit from the IRS.
Congress has made a variety of changes to the ERC, with some of them applying to both 2020 and 2021, and others applicable only to this year. The most notable changes include:
Thanks to Congress' action, if your company was impacted by COVID-19 but remained open, did not experience a sharp enough drop in gross receipts or received PPP funds, you may now benefit from the ERC.
The change in the amount of wages that qualify for the ERC also means the potential for more financial relief for your business. An employer can now claim $7,000 per employee for the first two quarters, for a total credit of $14,000 in 2021.
Have more questions on the ERC and how it could impact your payroll operations? Call the payroll experts at Future Systems for specific guidance and help maximizing your credit.