The pandemic took a toll on many aspects of the United States economy and its citizens. One of the hardest-hit aspects of the United States economy during the pandemic was business establishments. In fact, it is estimated that over 200,000 businesses closed their doors permanently over the last two years. Those that managed to remain open continued to struggle to retain employees and make ends meet financially.
In order to help support businesses that operated during the pandemic, the government has created an Employee Retention Tax Credit program which allows business owners to receive up to $26,000 per W2 employee that was retained during the pandemic. While this tax credit is fairly new and can become quite confusing to apply for, our dedicated and diligent team at The Lovely Law Firm can help with the Employee Retention Tax Credit applications for our clients across South Carolina. In recognition of the financial burden the pandemic has placed on all businesses, we are committed to ensuring that they receive the financial support they deserve as a result of their hard work during this difficult time.
What Is The Employee Retention Tax Credit?
The Employee Retention Tax Credit was created in March of 2020 through the CARES Act to help support and reimburse businesses for their efforts to stay open during the pandemic. Essentially, the Employee Retention Tax Credit (ERTC) is a federal stimulus program that provides financial compensation to business owners who operated and maintained W2 employee(s) during the pandemic.
The main goal of this financial stimulus program was to encourage business owners to keep employees on their payrolls instead of laying off employees to save on expenses. Additionally, this program was intended to help the working class maintain jobs instead of being laid off in mass by business owners across the country.
Any funds received through the ERTC fund are not loans. This means that anything received in the form of an ERTC payment does not need to be paid back. Additionally, even though this form of financial assistance is labeled as a tax credit, it is actually paid directly by the IRS. There are no stipulations as to how a business owner can use these funds.
Who Is Eligible To Receive Employee Retention Tax Credit?
Any business that operated during 2020 and 2021 and retained W2 employees can apply for the Employee Retention Tax Credit program, however, whether they qualify is another discussion. In order to qualify for the tax credit a business owner must prove that they had a significant drop in their gross revenue or a “greater than nominal” impact on the business during the pandemic caused by government mandates and restrictions. Businesses with less than 100 employees in 2020 and less than 500 employees in 2021 are eligible to apply for the ERTC.
There are some businesses that made money during the pandemic, however, that does not mean they are not eligible for the ERTC financial program. Reduction in revenue is the easiest way to apply for the ERTC program, however, there are other mechanisms that businesses can utilize. The Nominal Impact Test is designed to incorporate more qualitative factors in the analysis, including supply chain disruption in relation to government mandates and restrictions.
The ERTC is designed to help businesses in any industry meaning restaurant, retail, and trade business owners can all qualify for the tax credit as long as they meet the above stipulations. Essentially, businesses from almost any industry, including non-profits can apply for the Employee Retention Tax Credit. However, businesses that are related to the state, local, or federal government are not eligible to apply for the ERTC.
Many businesses have missed out on the opportunity to receive up to $26,000 per W2 employee because they have received Paycheck Protection Program (PPP) loans. However, businesses are eligible to apply for the ERTC financial program even if they have received a PPP loan. The only catch is that any PPP funds received and put toward payroll must be accounted for before when applying for the ERTC program.
Can My CPA Apply For The Employee Retention Tax Credit On My Behalf?
Many CPAs are misinformed about the Employee Retention Tax Credit financial program. When a CPA notifies a business of its ineligibility, it is almost always formed off of their findings and analysis of the Revenue Reduction Test. However, when a Nominal Impact Test is conducted, many of these “ineligible” businesses are actually eligible for the program.
It is recommended that business owners not rely on their CPA’s opinion of their eligibility as many CPAs are reluctant to use and analyze the Nominal Impact Test. Thus they are falsely informing their clients that they are ineligible, when in fact they are. Our team has the ability to conduct these tests and analyze the results in order to determine whether or not a business is eligible to apply for the ERTC program.
Additionally, CPAs have been found to falsely inform their clients of the deadlines that surround the ERTC program. This is not on purpose, but rather due to the fact that information on the program is not readily available to all. In fact, some have even told their clients that the allocated funds will run out sooner or later, so they should file as soon as possible. This, however, is not the case, and the IRS has not stated that the allocated funds are being depleted.
What Are The Deadlines To Apply For The Employee Retention Tax Credit
The Employee Retention Credit deadline in 2022 has changed since the program was first implemented in 2020. The ERTC program has two deadlines. For every business quarter in 2020, businesses have until April 15, 2024, to apply for the ERTC program. For every quarter in 2021, businesses have until April 15, 2025, to apply for the ERTC program.
How Do I Apply For The Employee Retention Tax Credit?
When a business applies for ERC tax credit assistance, the first order of business is to conduct a detailed analysis of revenue and pandemic impacts. The ERTC must be claimed using IRS Form 941-X, “Adjusted Employer’s quarterly federal tax return or claim for refund”. Each 941-X must be filed separately for each calendar quarter for which the ERTC is being claimed. Unlike original Form 941s, which must be filed by the last day of the month following the end of each quarter, 941-X amendments must be filed within three years after the original due date.
The instructions for Form 941-X quickly become complicated and filled with financial jargon that is too hard to understand for many average business owners. Our team is always willing to provide ERC refund help and answer any questions. Give us a call to discuss your eligibility and how The Lovely Law Firm can help!
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