The Employee Retention Tax Credit is Helping US Daycares and Preschool
The Employee Retention Tax Credit (ERTC) is a new law introduced by the federal government in 2020. It allows companies to receive a tax credit for retaining or hiring employees during the economic downturn. This credit is particularly beneficial for daycares and preschools because it can offset some of the expenses associated with hiring and retaining employees.
In this article, we'll discuss how the ERTC works, how daycares and preschools can take advantage of it, and some of the best practices for maximizing the credit:
Overview of the Employee Retention Tax Credit
The Employee Retention Tax Credit (ERTC) is a refundable tax credit for employers who retain employees and pay qualifying wages during the COVID-19 pandemic. Enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the ERTC provides financial assistance to eligible employers affected by the coronavirus-related economic slowdown. The ERTC is designed to help small businesses maintain their workforce and stay operational during uncertain conditions arising from the coronavirus outbreak and resulting public health response.
Qualifying employers include most businesses with fewer than 500 employees as well as non-profit organizations. Certain types of businesses such as daycare centers, pre-schools, educational institutions, and food delivery services are eligible for additional incentives under this program. Employers that previously received grants under either the Paycheck Protection Program or Employee Retention Credit are not eligible to receive any additional credits.
The amount of credit available is equal to 50% of employee wages up to $10,000 per employee per calendar year from March 13, 2020 until December 31, 2020 with additional amounts available for wages paid between January 1st 2021 – June 30th 2021. Generally speaking, no credit is available for wages paid after December 31st 2020 unless an amendment is made before then by Congress. In order to qualify for the ERTC credit, employers must provide qualified wages within 90 days after business operations resume or prior to June 30th 2021 if there has been no suspension of operations due to COVID-19.
Who Qualifies for the ERTC
The Employee Retention Tax Credit (ERTC) is a powerful tool available to qualifying daycare providers and preschools in the United States. The ERTC was created as a part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and is designed to help businesses offset the impact of the coronavirus pandemic on their operations.
Who qualifies for the credit? Let's find out:
The Employee Retention Tax Credit (ERTC) is available to employers of all sizes that operate with fewer than 500 employees and meet certain criteria. Applicable employers include any trade or business, including nonprofits, who fully or partly suspended operations during either full or partial shutdowns related to COVID-19, or have experienced a significant decline in gross receipts.
To qualify for the ERTC, a qualified employer must demonstrate that one of the following scenarios applies:
- They have been issued a governmental order to suspend operations due to the COVID-19 health emergency;
- They experienced a full or partial suspension of operation due to inadequate supply of labor, materials shortages limited transportation, building closures related to COVID-19 compliance measures; or
- Experienced an overall gross receipts decline of at least 20 percent as compared to the same quarter in the prior year.
Employers may be eligible for up to $5,000 per employee as part of this credit. For additional details and eligibility criteria, please refer to the IRS website.
The Employee Retention Tax Credit (ERTC) is a federal program that can help qualified daycare and preschool employers maintain their workforce. The ERTC provides a refundable tax credit of up to $5,000 per employee, per quarter that meets certain criteria.
In order to be eligible for the incentive, employers must satisfy several requirements:
- Have experienced an economic hardship due to the Covid-19 Pandemic
- Have gross receipts that are less than 80% of their typical receipts from the same quarter in 2019 or the preceding quarter in 2020
- Have employees who are not physically present onsite due to COVID-19 with wages equal to at least 50% of their normal wages before the economic hardship
Eligible employees for this program include those who were on payroll from March 12th through December 31st, 2020 and worked during this period. Additionally, any new employees hired after June 30th, 2020 are also eligible for the credit if their employment relates to economic hardship related to COVID-19. Employers should be aware that part-time employees can qualify as well and there is no minimum hour requirement for eligibility based solely on length of service with an employer.
How the ERTC Can Help Daycares and Preschools
The Employee Retention Tax Credit (ERTC) was created to help businesses withstand the economic effects of the pandemic. This credit can be used to offset the cost of wages, help cover expenses associated with COVID-related measures, and even help businesses recover and rehire employees they laid off due to the pandemic.
Daycares and preschools are among the many industries that are eligible for the ERTC, and understanding the ins and outs of utilizing this credit can be incredibly beneficial for small businesses.
Overview of Tax Credit Benefits
The Employee Retention Tax Credit (ERTC) is a new federal economic relief program offering tax credits to businesses who have seen a decline in revenue due to the coronavirus pandemic. The ERTC applies to private businesses, non-profits, and public organizations such as daycare centers and preschools that have seen financial losses related to the crisis. This tax credit can help eligible employers retain their current employees at current pay levels while providing needed financial relief during these difficult times.
The ERTC can provide employer a tax credit of up to 70% of qualified wages paid or incurred between March 13th, 2020 and January 1st, 2021, up to $15,000 per employee for all calendar quarters.
In order to qualify for the ERTC credits, employers must demonstrate one of two conditions:
- Their gross receipts in either the current quarter or preceding quarter must be less than 50 percent of their gross receipts for the same quarter in 2019; or
- The entity has fully or partially suspended operations during any quarter due to restrictions imposed by a governmental authority due to COVID-19.
Additional rules apply regarding how much wages can be taken into account when determining eligibility for this credit and which employees need to be included when calculating the amount of qualifying wages. Additionally there are limits on qualified wages taken from highly compensated employees that receive more than $100K per year.
This program offers an unprecedented level of assistance for affected daycare centers and preschools allowing them to save jobs and keep parents informed about their children's care which is especially critical during difficult times like these. By taking full advantage of this potentially substantial benefit small business owners should consider consulting with an accountant or other financial advisor who specializes in taxation or payroll services before filing a claim.
Impact of ERTC on Revenues
The Employee Retention Tax Credit (ERTC) was created to help businesses of all sizes respond to the economic challenges of the COVID-19 pandemic. The ERTC provides an incentive for employers to retain employees and can be used to offset certain costs associated with paying employees. It is particularly beneficial to daycares and preschools, both financially in the short term and operationally in the long term.
Daycares and preschools can use the ERTC to receive a federal tax credit of up to $5,000 per employee per quarter. This means that daycares or preschools that qualify for this incentive can receive much-needed funds that can be reinvested into their operations, allowing them to open or stay open.
Moreover, as one of the eligibility requirements of the ERTC is providing health insurance options for employees, daycares and preschools may find it easier than ever before to attract new teachers and staff who are looking for jobs with health insurance benefits. This could be particularly beneficial in developing countries that have struggled economically due to COVID-19 closures but are now starting up again. Although health insurance may not have been an option for staff prior to closure, it now becomes possible with this tax credit in place.
Lastly, because the program lasts until December 2021, there is ample time for expanding child care centers wishing to maximize benefits through increased employment and better salaries over this time period. Furthermore, greater job security provided by programs like these can also lead teams working in small businesses such as daycares or preschools either staying with their current job setting, or being more inclined towards seeking positions within similar organizations due to greater job stability during such times when finances are vital considerations when making cohesive decisions within small business settings.
Strategies for Maximizing the ERTC
The Employee Retention Tax Credit (ERTC) has been a beneficial program for US daycares and preschools during the COVID-19 pandemic. The ERTC is helping businesses to keep their employees and stay afloat during the crisis.
In this article, we will discuss the strategies which daycares and preschools can utilize to maximize the benefits of the ERTC:
Calculating Eligible Wages
When it comes to maximizing the Employee Retention Tax Credit (ERTC), one of the essential steps includes calculating your eligible wages. The ERTC will then be based on those eligible wages. According to IRS Publication 5175, eligible wages are limited to “wages and compensation paid by an employer that is an eligible employer as defined in [IRC § 3111(d) (3)]”. Additionally, the calculation of eligible wages must subtract any qualified health plan expenses that were paid by the employer in 2021.
Understanding exactly how to calculate your eligible wages will be instrumental in maximizing your savings from the ERTC. The first step involves subtracting any qualified health plan expenses that were paid by the employer during 2021 from their total taxable wage and non-wage compensation costs; this is referred to as ‘excluded amounts’ for tax purposes. After excluding any payments for qualified health plans or other excluded items, employers can then add up their gross taxable wage and non-wage payments costs up to $10,000 per employee for 2021; this total can then be used as a starting point when filing for ERTC credits on their quarterly returns or annual income tax filing.
Maximizing the Employee Retention Tax Credit (ERTC) credit is essential for daycares and preschools throughout 2021 in order to realize full financial benefits available through this program for relief during times of economic difficulty due to COVID-19 restrictions. Calculating eligible wages through a thorough understanding of each individual employer’s wage and non-wage cost structure is a key component of this process, allowing employers to assess proper amounts available through ERTC credits while ensuring they remain compliant with all applicable IRS regulations.
Claiming the Credit
Claiming the Employee Retention Tax Credit (ERTC) can help US daycares and preschools maximize this valuable tax credit. The ERTC provides a fully refundable 50% wage credit of up to $5,000 in 2020 wages or compensation per employee in each quarter to eligible employers. To receive the maximum benefit of the ERTC, employers should ensure they are eligible for the credit, understand and properly calculate all required payroll information, and submit their payment requests in a timely manner.
Eligibility: Employers who have experienced a certain level of revenue loss due to COVID-19 are eligible for the ERTC. In order to qualify, employers must experience either a 20% decrease in quarterly gross receipts relative to 2019 OR operations must be fully or partially suspended during government mandated shutdowns.
Calculation: To properly calculate the ERTC, employers should consider which wages are covered by the program as well as which employees qualify for inclusion into calculations. Generally, wages paid with respect to all employees between 3/12/20 – 12/31/20 qualify for the credit towards up $10,000 of wages per employee over 2020; In addition, employers are only able to take advantage of this credit for those earning less than $3,000 in any given quarter during 2020.
Maximizing Benefits: When claiming the ERTC it’s important to move quickly – because it is available on both 2020 4th Quarter payrolls and 2021 1st Quarter Payrolls it is possible that certain businesses will be able to benefit from this tax incentive twice. Additionally employers should remember that they can now elect not claim certain Social Security employment taxes paid or accrued on behalf of their employees related using Form 941 (normally required at filing time) at quick deadlines throughout 2021. This means closely watching calendar dates such as April 15th where employer must have filed either their 4th quarter form 941 quarterly return OR filed an advance federal tax return in order to elect not paying these taxes for prior 90 day period ending December 31st.
The Employee Retention Tax Credit (ERTC) has been a great success for Daycares and Preschools in the United States. The ERTC has helped businesses keep their staffs, retain their employees, keep wages from declining, and even recruit new talent despite the economic crisis caused by the COVID-19 pandemic. This tax credit has been very effective in helping businesses protect their livelihoods and remain open for their customers.
This article looks at the details of the ERTC and how it has helped US daycares and preschools:
Summary of the ERTC Benefits
The Employee Retention Tax Credit (ERTC) is a critical relief program that provides support for childcare operators in the United States. This program is designed to assist daycare centers and preschools as they continue to meet the demands of childcare during the COVID-19 pandemic. This tax credit offers up to $5,000 per employee annually, allowing daycares and preschools to access funds that can help them retain staff and rehire employees who have been laid off due to financial hardship during the pandemic.
The ERTC was created as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in March 2020. Since then, US daycares and preschools have been able to utilize these resources in order to keep staff on-board throughout these tumultuous times. Companies may also be eligible for additional tax credits for retaining existing employees or hiring new ones within two trimonths of December 31st 2020 or December 31st 2021 depending on when they apply. These credits can be claimed through filing with their respective IRS forms 941, 966 or 941-X for the year in which the payment was received.
This flexible program is designed to give ongoing support as well as one-time payments of up to $1,500 per employee providing vital resources necessary for continued operation throughout this turbulent time period. The ERTC provides an avenue of hope while helping daycares and preschools remain open and serve their communities during this difficult time by supporting their employers through these measures that specifically target businesses that provide essential services such as daycare and pre-school care services.