ERTC Experts

Most US Businesses Have Not Claimed Their Employee Retention Tax Credit ERTC

The Employee Retention Tax Credit (ERTC) is a significant new tax incentive program made available to employers who faced significant business reversals due to the COVID-19 pandemic. Developed by congress and introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, this credit enables eligible employers to receive an up-front tax credit to offset current payroll taxes when hiring and retaining new employees in 2020.

According to recent statistics, however, most US businesses have failed to take advantage of this opportunity even though they may be eligible. In this article, we examine what the ERTC is and why so few companies appear to be claiming it:

Overview of the ERTC

The Employee Retention Tax Credit (ERTC) is a substantial financial incentive provided by the US government for businesses to retain their employees during the pandemic. It lets employers who have been affected by the pandemic to receive a tax credit for wages paid to their employees. The ERTC is a great opportunity for businesses to reduce their taxes, but unfortunately many businesses have not taken advantage of it.

In this article, we'll provide an overview of the ERTC and explore why businesses should consider claiming this tax credit.

What is the ERTC?

The Employee Retention Tax Credit (ERTC) is a refundable federal tax credit designed to help US businesses and organizations that were adversely impacted by the Covid-19 pandemic. It was created as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in March 2020 and is available for employers who are subject to shutdown orders due to the virus or experienced significant revenue losses.

The ERTC can be used to offset Social Security taxes paid by employers on wages provided up until 2021, resulting in substantial savings for many businesses.

The credit is available to both full-time and part-time employees with pertinent wages up to $10,000 per employee per year with a maximum of 500 eligible employees per business or organization. Certain eligible employees may qualify for a maximum credit valued at $5150 per employee during half of 2020 and another $7000 during the other half of 2020 for a total ERTC of $12,500 per employee for all of calendar year 2020.

Industries that experienced significant revenues losses due to pandemic related shutdowns may be able to claim even higher amounts depending on their reduced level of gross receipt in Q2/2020 compared with Q2/2019. Employers can receive immediate benefits from the ERTC by claiming them as soon as they pay Social Security taxes or obtain an immediate cash payment from the IRS if they are qualified small businesses under certain provisions noted under Section 2301(b)(3) of the CARES Act legislation.

Who is eligible for the ERTC?

Eligibility for the Employee Retention Tax Credit (ERTC) is based on the following criteria: employers must have been in operation on or before March 12, 2020 and must be closed due to a COVID-19 governmental response order, experienced a full or partial suspension of business operations as an effect of governmental COVID-related order, or experienced a reduction of gross receipts greater than 50% when compared to the same quarter in 2019.

The ERTC allows businesses to claim a refundable tax credit against income taxes equal to 50% of qualified wages paid per employee (up to $5,000). Qualified wages are wages paid by eligible employers on or after March 13, 2020 and before January 1, 2021. Notably, the ERTC is not limited to employees who have been laid off; it also applies for employers who maintain normal staff levels. This is extremely beneficial for companies that continue operations despite having taken a financial hit—they can get back some of what would otherwise be lost during this crisis.

The way employers receive payment from this program differs from PPP loans in that eligible employers will receive up-front credits against payroll taxes imposed under the Federal Insurance Contributions Act and Self Employment Contributions Act. The benefits from this program are received when an employer files payroll tax returns (Form 941) and these payments may be refunded if such filings show that the amount taken was more than what the employer was entitled to receive for such period. It’s important to note that both 501(c)(3) organizations and government entities are also eligible for this program – allowing even more organizations a chance at saving jobs while still being able to provide services/benefits during this difficult time.

How much is the ERTC?

The Employee Retention Tax Credit (ERTC) is a provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that applies to US businesses in various phases of shut down. The tax credit is a refundable credit against certain employment taxes equal to 50% of qualified wages paid by employers to their employees. Qualified wages are generally defined as wages subject to federal income tax withholding, Medicare and Social Security taxes for each employee for up to $10,000 paid in 2020.

Qualified employers may be eligible for ERTC benefits of:

  • A tax credit worth up to 70% of qualified wages including related health plan expenses, up to a total limit of $10,000 per employee per quarter;
  • An increase in the limit for the Work Opportunity Tax Credit from $2,400 per eligible employee in 2020 to 40% of first year wages; and
  • Refundable credits on “family leave” or “sick pay” payroll liabilities.

In addition, newly created businesses with two months or less of existing payroll will have access to limited funding through the Small Business Administration's Paycheck Protection Program and other sources which can cover some eligible ERTC expenses.

Reasons Why Businesses Have Not Claimed the ERTC

The Employee Retention Tax Credit (ERTC) is a provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that allows businesses to recoup a portion of the wages they pay to their employees. It is meant to provide relief to businesses affected by the pandemic, and yet, most businesses in the US have yet to take advantage of the credit.

This section will discuss the reasons why businesses have not claimed the ERTC:

Lack of Awareness

One of the primary factors preventing businesses from claiming the ERTC is a lack of awareness. Many businesses are simply unaware that the program exists or are unfamiliar with the details and eligibility requirements. This is particularly true for small businesses, which may be unaware of their potential opportunity to receive significant tax credits through the ERTC program.

Another issue is that, even if businesses are aware of the existence of the program and its basic outline, interpreting eligibility, understanding deadlines and properly submitting paperwork can be confusing. It can require extensive knowledge of IRS rules—and since business owners typically have limited resources to devote to understanding how exactly such programs work, they can easily overlook available opportunities for assistance or fail to properly research rules related to the program and their respective business situation in order to determine whether they qualify for benefits from it.

Furthermore, it is also possible that some businesses do not understand both how and when their qualifying wages must be reported on IRS Form 941 in order for their application for ERTC credit registration to succeed. If an employer has not sufficiently documented employee wages in past filing periods as required under section 3111(a) or proper wage payments have not been made during 2020 or 2021 while adhering to all applicable wage calculator rules under section 51(i), then they may mistakenly assume they cannot claim credit when in fact they could have possibly qualified resourcefully.

Confusion Over Eligibility Requirements

There is a great deal of confusion over the eligibility requirements for the Employee Retention Tax Credit (ERTC) which has likely contributed to many businesses forego taking advantage of this powerful tax credit. To claim the ERTC, an employer must satisfy both of the following criteria:

  1. Experienced Revenue Loss: A business must have experienced either a full or partial suspension of operation due to orders from a governmental authority, or experienced at least a 50% reduction in gross receipts during any quarter in 2020 compared with the same quarter in 2019.
  2. Eligible Employer: The business must also be an eligible employer, meaning it had fewer than 500 employees on average during 2019 or it has 1000 or fewer employees and several other features that make it difficult for some businesses to qualify.

Amidst all this confusion and uncertainty, some employers may feel unprepared to understand and claim ERTC benefits and may hesitate to seek out additional information or resources that could help guide them through the application process. Therefore, businesses should make sure they know their eligibility before applying for the ERTC and use available sources to properly understand all rules and regulations surrounding this financial benefit.

Complexity of the Application Process

The Employee Retention Tax Credit (ERTC) is a support program provided by the federal government to help business owners during this uncertain time caused by the COVID-19 economic crisis. This benefit was included as part of the CARES Act, and provides a generous tax credit which is directly connected to eligible wages paid during the 2020 calendar year.

Despite its potential for assisting businesses with their operating costs, most US companies, particularly small business owners and those in hospitality, restaurant industry and retail outlets have not claimed their Employee Retention Tax Credit. This is possibly due to a lack of knowledge about it or understanding how to apply for the credit on their taxes.

One of the main reasons why businesses may have not claimed this tax credit is due to the complexity of its application process. To be eligible for this credit an employer must meet certain criteria such as:

  • Having operations that were fully or partially suspended as a result of an order from an appropriate governmental authority due to COVID-19; or
  • Having a significant decline in gross receipts compared to corresponding period in previous year.

Additionally, businesses would have had to retain employees during this period and incurred direct cost while providing them with wages and health care benefits – all of which can be difficult factors for smaller companies in particular with limited resources – to calculate accurately in order to apply for the ERTC rightly.

Benefits of Claiming the ERTC

The Employee Retention Tax Credit (ERTC) is a program set up by the US government in response to the economic impact of the COVID-19 pandemic. Claiming this tax credit can provide a much-needed financial boost to businesses.

In this article, we'll look at some of the benefits of claiming the ERTC and how you can go about doing so:

Financial Savings

The Employee Retention Tax Credit (ERTC) is a tax incentive created in response to the COVID-19 pandemic. It is part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The ERTC provides an up to $5,000 credit per employee for qualifying wages paid between March 12, 2020 and December 31, 2020.

Businesses can claim up to $5,000 in total credits per employee eligible for a refundable payroll tax offset on their 2020 quarterly tax returns as well as their 2021 first quarter returns. The savings could be even greater if the employer chooses to credit any unused portion of the credit against its 2021 and 2022 payroll taxes instead.

Additionally, employers may be able to get some or all of their paid FICA taxes refunded if they hired workers after February 15th and meet other criteria for claiming the ERTC. Employers may also receive an additional 6.2% credit on wages used to partially fund an optional deferral of payroll taxes on qualified wages earned between August 1 and December 31, 2020.

In short, taking advantage of this valuable tax provision will yield major financial savings over time – not only due to taxable refunds but also because of reduced payroll taxes – so it’s well worth considering this option when filing quarterly reports or next year’s returns.

Improved Employee Retention

Claiming the Employee Retention Tax Credit (ERTC) can help businesses with improved employee retention. This credit reward employers for keeping their employees on their payroll throughout the year. The credit is refundable, allowing companies to receive a direct payout from the IRS in order to supplement other financial relief options.

An employer is eligible for the ERTC if they have been affected by COVID-19 and can document a reduction of revenue compared to the same calendar quarter from a prior year due to business operations being fully or partially suspended or a significant decline in gross receipts as prescribed by the IRS. Employers are also eligible if it’s determined that there has been an inability to find enough qualified employees in order to open up essential services.

Upon approval, employers can deduct up to 50% of wages paid up to $10,000 per employee for qualified wages paid between March 12, 2020 and January 1, 2021 – making this one of the most lucrative tax credits available during this period. In addition, employers can claim an additional tax credit on health insurance costs that are allocated against qualified wages during Q1 2021 and later. The credit will be reflected on an employer's quarterly Form 941 return as well as on their annual income tax return, providing payroll tax support and/or cash flow improvement spanning multiple fiscal years.

When employers register for the ERTC with Bureaus Benefit Solutions, they will have access to tailored compliance advisor tools that provide all necessary filing information in order to quickly claim benefits while ensuring they remain compliant with state reporting regulations. By taking advantage of ERTC through Bureaus Benefit Solutions makes it easy for employers identify eligibility criteria and maximize their perks so that businesses can cling onto employees through job security by reclaiming part of their wage costs from Uncle Sam!

Increased Employee Morale

Claiming the Employee Retention Tax Credit (ERTC) is an important way for those US businesses that have been affected by the pandemic to find financial support. While maximizing the savings through this credit is important, there are many other benefits to claiming the ERTC, particularly with regards to employee morale and engagement.

Recognizing and rewarding employees for their loyal service during a difficult time can help boost morale and create value amongst workplace staff. Companies that make use of the ERTC are often better-positioned to retain key personnel, leading to improved motivation across all workers; such incentives establish a larger sense of appreciation for work done throughout the pandemic.

Additionally, those businesses that make use of the ERTC are less likely to make drastic changes in terms of staff economic losses. This financial security helps protect jobs from layoffs or salary reductions, which naturally can lead to increased morale when people feel more secure within their employment arrangements. As such, companies can encourage higher engagement among staff given that short-term initiatives laid out for employees due to ERTC claims will offer more meaningful long-term job opportunities as well.

Conclusion

In conclusion, most US businesses are not taking advantage of the Employee Retention Tax Credit (ERTC) to help offset payroll costs during the COVID-19 pandemic. The credit is relatively simple to apply for and can be claimed for wages paid between March 12, 2020 and January 1, 2021. Business owners should take the time to understand their eligibility and requirements in order to receive the full benefit of this program before the filing deadline of March 31st, 2021.

While some businesses may find that the ERTC does not fit their particular circumstances, for those who are eligible it can be a helpful source of funds during these uncertain times.