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A Credit for Retaining Employees Might Be Available

Even though many Bertie County business owners are still working hard to recover and reach annual revenue levels that were significantly higher before the year 2020, there may be hope on the horizon for the county’s economy.

During the COVID Pandemic, local businesses that struggled to keep their doors open and their staff employed had the opportunity to recoup some of the losses they sustained as a result of the pandemic.

The Employee Retention Credit (ERC) is a stimulus program that was designed to assist businesses that were able to keep their employees during the pandemic.

The ERC was established to help those businesses. The program was established under the CARES Act, and it is a refundable tax credit in the form of a grant from the government that a business owner can claim for his or her company. This is in contrast to a loan, which would have to be paid back.

The ERC is a tax credit that can be obtained by businesses of any size, and eligibility is determined by the number of qualified wages and healthcare costs that are paid to employees.

Many small and medium-sized businesses are unaware of the program, which was designed to encourage businesses to continue paying their employees during the pandemic. However, the program’s intended purpose was to accomplish this.

For the tax year 2020 and the first three quarters of the following tax year (2021), businesses that successfully retained employees are eligible to receive a tax credit of up to $26,000 per employee.

For the company to qualify, it must either demonstrate a decline in revenue or demonstrate that it has been affected by a COVID event.

There are no restrictions placed on the amount that can be donated. A California restaurant proprietor was awarded close to $800,000 in funding.


“The program is available to a nail salon with two employees or a manufacturing company with thirty employees or more,” said George Merrick, President of the InFinnGroup. “The program is also available to individuals with disabilities.”

However, different rules apply to employers with under 100 employees and under 500 employees for certain portions of 2020 and 2021. The credit is offered to all eligible employers of any size that paid qualified wages to their employees.

The Infrastructure Investment and Jobs Act was passed on November 15, 2021, and it amended section 3134 of the Internal Revenue Code.

As a result of this amendment, the Employee Retention Credit can now only be applied to wages paid before October 1, 2021, unless the employer in question is a recovery startup business.

Even though the employee retention tax credits will no longer be available after October 1, 2021, businesses that meet the requirements can still take advantage of them if they are eligible.

If an individual has not previously applied for the credit, they are eligible to submit an application for a retroactive ERTC refund.

By Section 280C of the Internal Revenue Service Code, employer tax credits result in a reduction in wages equal to the amount of the credit, even though the ERC is not considered to be taxable income.

This reduction occurs in the year that the wages were paid; therefore, a credit for 2021 must be reflected on the tax return for 2021, even if the refund has not yet been received.

According to the most recent information that has been released by the Internal Revenue Service (IRS), individuals who have already submitted their tax returns can anticipate receiving their refunds anywhere from six to ten months after the date on which their returns were submitted.

Employers, including organizations that are exempt from paying taxes, are qualified for the credit if they operated a trade or business during the calendar year 2020 and experienced either: the complete or partial suspension of the operation of their trade or business during any calendar quarter as a result of governmental orders limiting commerce, travel, or group meetings due to COVID-19; or a significant decline in gross receipts.

The first day of the first calendar quarter of 2020 for which an employer’s gross receipts are less than 50 per cent of their gross receipt for the same calendar quarter in 2019 marks the beginning of a significant decline in gross receipts.

This decline continues until the first day of the first calendar quarter of 2020 for which an employer’s gross receipts are less than 100 per cent of their gross receipt

The significant drop in gross receipts will stop on the first day of the first calendar quarter that follows the calendar quarter in which gross receipts are more than 80 per cent of its gross receipts for the same calendar quarter in 2019.

The credit applies to qualified wages paid during either this period or any calendar quarter in which operations were suspended. Qualified wages include certain health plan expenses paid during this period.

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Wages paid to individuals who are related to an individual who owns more than fifty per cent of the business do not count as wages for the purposes of the ERC.

Nevertheless, a credit can be taken for wages paid to an owner and the owner’s spouse if the credit is for wages paid to an owner.

The bottom line is that the credit can only be applied toward a limited range of wage levels. When it comes to shareholders, the question that ultimately comes down to whether or not there is only one shareholder comes into play.

Even though the Internet is rife with businesses that will process the necessary paperwork for a fee, owners of businesses should consult with their accounting firms or certified public accountants to obtain additional information regarding the prerequisites and documents that must be submitted.

Visit the following URL for further details: IRS issues guidance regarding the retroactive termination of the Employee Retention Credit and Form 7200, Advance of Employer Credits

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