When can I claim the ERTC Credit?
If you’re eligible to claim the Employee Retention Credit (ERTC) tax credit, there’s still time to do so. Businesses that meet the ERTC eligibility requirements can claim the credit up to three years after filing their tax return or up to two years after paying, whichever comes later. This can be done by filing Form 941-X, which is the Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.
Form 941-X can also be used to report any errors or mistakes. Businesses can file claims for unclaimed credits for the year 2020 until April 15, 2024, and for the year 2021 until April 15, 2025.
How can I prevent making common Employee Retention Credit errors?
Many eligible employers missed out on claiming the Employee Retention Credit (ERTC) in the past, but there’s still an opportunity for them to take advantage of the credit. Employers can file amended employment tax returns to claim the ERTC, and the statute of limitations for filing amended quarterly returns is generally three years from the date of filing Form 941. According to the Form 941-X instructions, the period of limitations to amend the form begins on April 15th of the succeeding year in which the form was filed.
For example, to apply for the ERTC for the second quarter of 2021, assuming the original Form 941 was filed on time, the amended return needs to be submitted by April 15, 2025. However, to minimize risk during the claims process, employers need to understand who qualifies for the ERTC and other nuances of ERTC eligibility and claims. It’s essential to keep appropriate documentation as a key element for meeting all compliance requirements.
What are Employee Retention Credit qualified wages?
Qualified wages refer to the wages or compensation paid by an eligible employer to some or all of its employees after March 12, 2020, and before Oct. 1, 2021. This includes the eligible employer’s qualified health plan expenses allocated to these wages. However, the term “qualified wages” varies depending on the number of full-time employees employed by the business.
For businesses with more than 100 full-time employees, qualified wages refer to the wages paid to an employee for the time when the employee was not performing services due to a government order that either entirely or partially suspended the employer’s business activities or a significant drop in gross receipts. On the other hand, for businesses with 100 or fewer full-time employees, qualified wages are wages paid to any employee during a time when business operations were completely or partially halted due to a governmental order or when the company’s gross receipts significantly dropped.
It’s important to note that “qualified wages” include taxable wages, such as tips, as well as certain contributions to health benefit plans. Employers should consult with a tax professional or refer to official IRS guidance to ensure they meet all necessary criteria for claiming the Employee Retention Credit (ERTC).
Do you include tipped wages in qualified wages?
Tips are included in “qualified wages” only if they are subject to FICA taxes. In most cases, this means that tips must exceed $20 for a calendar month for an employee. However, if tips amount to more than $20 for a calendar month, then all tips, including the first $20, are considered “qualified wages”.
Employers must keep track of all tips received by their employees to accurately determine which tips qualify as “qualified wages” for the Employee Retention Credit (ERTC). This includes all tips that are subject to FICA taxes, including those that exceed the $20 threshold for a calendar month.
What is considered a large employer and small employer under the ERTC?
The qualifications for claiming the Employee Retention Credit (ERTC) vary slightly depending on the size of your business. To determine whether you’re considered a large or small employer, you need to look at the number of employees on your payroll.
For the 2020 ERTC, small employers are those businesses with 100 or fewer full-time employees. For the 2021 ERTC, small employers are those businesses with 500 or fewer full-time employees. On the other hand, for the 2020 ERTC, large employers are those businesses with more than 100 full-time employees, and for the 2021 ERTC, large employers are those businesses with more than 500 full-time employees.
It’s important to know who qualifies as a full-time employee when examining the size of your business for the ERTC. According to the IRS, a full-time employee is an employee who works 30 hours or more per week or 130 hours per month, pursuant to IRC 4980H.
As an employer, it’s essential to understand whether your business qualifies as a small or large employer for the ERTC. By knowing the size of your business and who qualifies as a full-time employee, you can determine the amount of qualified wages you can claim for the credit. It’s recommended to seek professional guidance or refer to official IRS guidance to ensure you meet all necessary criteria for claiming the ERTC.
Is ERTC eligibility only for full-time employees?
When calculating the Employee Retention Credit (ERTC), an employer can include wages given to both part-time and full-time workers. However, the credit can only be computed on the first $10,000 in salary and health plan expenses paid to each employee during each credit-generating period.
It’s important for employers to keep accurate records of employee wages and health plan expenses to determine the amount of qualified wages for the ERTC. Qualified wages are only eligible for the credit if they were paid during the designated credit-generating period and meet other eligibility criteria.
By accurately calculating the amount of qualified wages and health plan expenses, employers can ensure they claim the maximum amount of the ERTC for each eligible employee.
What types of businesses qualify for the Employee Retention Credit?
There is a broad range of businesses across various industries that can meet the Employee Retention Credit (ERTC) eligibility requirements. Some of the industries that can meet the qualifications for ERTC eligibility include construction, restaurants, hospitality, education, government, industrial, not-for-profit, real estate, and technology.
Can churches and religious organizations claim the ERTC?
Churches and religious organizations are eligible to claim the Employee Retention Credit (ERTC). For instance, if you operate a church or religious organization that was impacted by government-ordered capacity restrictions on gatherings or suffered a significant drop in gross receipts, you may meet the qualifications for claiming the ERTC.
It’s important to note that for churches and religious organizations, qualified wages do not include wages paid to any individual who is employed in a capacity substantially related to the exercise of religious worship. Additionally, the ERTC only applies to qualified wages paid to employees who are not performing services for the employer due to a suspension or significant decline in business activity.
To claim the ERTC, churches and religious organizations must meet all necessary eligibility criteria and keep accurate records of employee wages and health plan expenses. By seeking professional guidance and utilizing up-to-date technology solutions, churches and religious organizations can maximize the ERTC and its benefits.
Can you claim other tax credits along with the ERTC Credit?
In most cases, taking a “double-dip” approach is not allowed when it comes to tax credits. This means that you can’t claim a credit on qualified wages for the Employee Retention Credit (ERTC) and certain other tax credits, such as paid family medical leave or the Work Opportunity Tax Credit (WOTC).
For the ERTC, businesses can only claim the credit on wages that are not forgiven or expected to be forgiven by the Paycheck Protection Program (PPP). It’s important to keep in mind that businesses must remain fully compliant with all regulations and guidelines when claiming tax credits.
How long does it take to receive the ERTC Credit?
Once you have met the eligibility requirements for the Employee Retention Credit (ERTC) and filed Form 941-X with the IRS, you will be eligible for a refund. However, it’s important to note that the IRS does not provide a specific timeframe for how long it will take to receive the refund.
Based on estimates, businesses can expect to wait around nine months to receive a refund after claiming the ERTC. This timeline may vary depending on a variety of factors, such as the complexity of the claim and any potential processing delays.
While waiting for the refund, it’s important to keep accurate records of all documentation related to the ERTC claim. This includes records of employee wages and health plan expenses, as well as any other relevant documentation. By staying organized and prepared, businesses can ensure a smoother process and potentially expedite the refund timeline.