Small Business ERTC Refundable Claims PreQualification Application Launched
The Small Business Administration (SBA) has launched the Prequalification Application for businesses to receive refundable payroll tax credits through their Employer Retention Credit (ERTC). The ERTC is a fully refundable payroll tax credit that is part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Under the CARES Act, qualifying businesses can receive up to $5 million for 50% of qualified wages paid to employees.
Businesses that qualify for the ERTC have an opportunity to significantly reduce their taxable income and received much needed funds during these difficult times. The SBA’s Prequalification Application simplifies the process for business owners who are seeking an ERTC by providing them with a detailed overview of eligibility criteria and instructions on how to apply. Through this application, businesses can determine whether or not they are eligible for ERTC funds quickly and accurately.
It is important to note that ERTC funds are not subject to repayment terms as they are deemed a refundable tax credit rather than a loan. Additionally, businesses must meet certain eligibility qualifications before they will be able to submit an application successfully. To learn more about these qualifications and review filing requirements please refer to the SBA’s guidelines found here: Link.
Overview of the ERTC Refundable Claim
The ERTC Refundable Claim is a great opportunity for small businesses to get access to some extra funds to help them navigate difficult times. By participating in the program, businesses can get a refundable amount directly from the government. The amount is based on the business’s eligible expenses that it has incurred in 2020, including payroll costs, rent, utilities, and mortgage interest.
It's important to note that businesses must pre-qualify before applying for the ERTC Refundable Claim. This article will provide a comprehensive overview of this program as well as how to pre-qualify for the claim:
The Employee Retention Tax Credit (ERTC) is a refundable tax credit for eligible employers equal to a percentage of qualified wages paid to employees for periods beginning after March 12, 2020 through August 31, 2021. Eligible employers must have been affected by COVID-19 in order to claim the credit. An affected employer is defined as one who (1) wholly or partially suspended operations because of orders from an appropriate governmental authority limiting commerce, travel or group meetings due to COVID-19; or (2) experienced a significant decline in gross receipts.
To be eligible for the ERTC, an employer must meet the following criteria:
- Have fewer than 500 full time employees on average during 2021
- Face a decrease in revenue of greater than 20% vs. 2019 revenue through either Q1 & Q2 2021 combined or declining more than 50% from one quarter in 2020 released from prior years revenues.
- Pay qualified wages as determined by the employee’s salary history with the employer.
- Qualified wages include payroll costs and adjustments related to such costs that are paid with respect to periods beginning after March 12, 2020 and ending before January 1, 2021 (up to $10k per employee). This includes salaries, health benefits and state/local taxes imposed on compensation. Non qualified wages are business owners’ remunerations that exceed $10k/year plus bonus payments and other supplemental allocations made to highly compensated employees as well as annual vacations that exceed $10k /year.
Types of Refundable Claims
The Employee Retention Tax Credit (ERTC) is an available refundable tax credit for eligible employers affected by COVID-19. There are two types of refunds: Partial Refundable Claim and Full Refundable Claim. Generally speaking, partial refundable claims would be more beneficial when employers have employees that make more than the maximum salary limit, while full refundable claims are beneficial when employers have employees that make less than the limit or for new employees that are hired after February 15, 2020.
Partial Refundable Pre-Qualification Claim:
- A partial pre-qualification application is designed to identify which of the eligible businesses can receive a portion of their total ERTC claim as a refund from the IRS. In order to qualify, at least 50% of the taxpayer’s revenue must come from one or all of the three following categories: selling goods/services; renting real estate; or leasing tangible property.
- This section also requires eligible wages paid to employees in order to get started on a pre-qualification application.
Full Refundable Claim:
- A full refundable claim requires businesses to prove they fully qualify for ERTC benefits by submitting additional information such as payroll records and qualified health plan expenses.
- This section also requires additional qualifying items such as tax return summary (including Form 941s, payroll taxes), employee’s salaries and wages report 3rd party information from payroll processor reports like detail industry codes/NAICS codes etc., and qualified health plan expenses detail report with employer’s contributions toward it for each quarter of 2020 compared against corresponding quarters in 2019.
- Without these details, eligibility will not be determinated and a tax credit cannot be determined and/or processed by IRS upon filing with Department of Treasury or IRS directly.
The Small Business Employee Retention Tax Credit (ERTC) refundable claims pre-qualification application process has been launched for qualifying businesses. This is an important step for businesses looking to take advantage of the ERTC and receive the refunds they are due.
The pre-qualification process will help determine eligibility of businesses to receive the credits. In this article, we will look at the pre-qualification process and what businesses need to do to complete it:
- Step 1: Determine Eligibility
- Step 2: Gather Required Documents
- Step 3: Submit the Pre-Qualification Application
- Step 4: Receive the Pre-Qualification Confirmation
The Pre-Qualification Application is designed to quickly determine whether applicants qualify for the Small Business ERTC Refundable Claims program. The application covers a variety of topics related to eligibility for the program, including general and business information.
To be approved for the pre-qualification process, applicants must provide detailed information about their legal status; address; owners; shareholders and directors; employee information; financial records; collateral pledged and business operations. After verifying all submitted materials, the pre-qualification status will be assigned to qualified businesses.
Once approved, eligible businesses may apply for a variety of relief options that are available through the program. These options include loan guarantees and other benefits that can help businesses with their immediate needs and sustain them in these tough economic times. The Pre-Qualification Application is an important step in helping small business owners successfully navigate these unique times and position themselves for long term growth and recovery.
Individuals applying for refunds for employee retention tax credits through the Small Business ERTC Prequalification Application must submit required documents to support their applications. The documents necessary to complete your submission are as follows:
- Form 941, “Employer’s Quarterly Federal Tax Return”
- Form 1040, “U.S Individual Income Tax Return”
- Form W3, “Transmittal of Wage and Tax Statements”
- Payroll tax filing documents or third party tax form records
- Documentation of services provided by third parties related to payroll providers
This documentation should match the wage and compeptionary benefit information submitted in your application. If you do not submit the required documents with your application, the approval process may be delayed and you may not receive a decision for upward of several weeks. It is important that you send all relevant documents at the time of submittal in order to speed up this process.
Benefits of Pre-Qualifying
The Small Business ERTC Refundable Claims PreQualificationApplication has been launched to help small business owners, who qualify, receive the money they are owed quickly and efficiently. Pre-qualifying is a great way to save time and help simplify the process. It also ensures that businesses get the money they are owed as soon as possible.
Let's look at the details of how pre-qualifying works, as well as the benefits it offers:
Faster Processing Time
Pre-qualifying for the Employee Retention Tax Credit (ERTC) Refundable Claims can help small business owners speed up the processing time significantly. By pre-qualifying, a small business has already proven their eligibility for the ERTC refund and can expect to receive the credit soon after submitting the application. Because of this, businesses that pre-qualify usually don’t have to wait for additional verification or other steps in order to receive their credit – this is especially beneficial for businesses that need cash flow quickly!
Additionally, pre-qualifying makes it easier for businesses to change their ERTC status and claim a higher percentage if they meet certain criteria. Pre-qualifying helps illustrate a prior commitment to monitoring employee wages, which is often beneficial in cases where there are limited records or data available.
Reduced Risk of Rejection
Reduced Risk of Rejection: Pre-qualifying a Small Business ERTC Refundable Claim is an excellent way to reduce the risk of rejection from the CRA. By pre-qualifying, you can quickly identify any potential issues with your claim and resolve them in advance. This will help you to ensure accuracy when filing your claim and increase the likelihood that your claim will be accepted.
In addition, pre-qualifying can help you create confidence in dealing with the CRA and provides you assurance that your claim is being processed as efficiently as possible. Pre-qualifying can give you greater peace of mind when it comes time to make your refundable claim for ERTC purposes.
To conclude, the Small Business ERTC Refundable Claims Pre-Qualification Application will help small business owners determine their eligibility for the Employee Retention Tax Credit (ERTC), allowing them to receive tax refunds which can be used to stabilize and grow their business.
The application provides a simple questionnaire that makes it easy to understand eligibility requirements and how the process works. This critically important program provides working capital for businesses at a time when it is actively needed and will allow them to keep employees on payroll during this challenging economic period.