If your business is located in Georgia, you may be eligible for an ERTC tax credit. This is a tax credit that is based on gross receipts and wages earned in the state. For businesses, there are several things to keep in mind when determining whether your business is qualified.
Employers can elect to use an alternative quarter to calculate gross receipts
The Employee Retention Credit (ERC) is a refundable tax credit for small businesses. The credit is designed to help offset a significant decline in gross receipts. In order to claim the credit, companies must meet several requirements. Among those requirements is that the business must have a minimum of 100 employees in the year. It is also important to understand that the credit is available only to eligible businesses.
ERTC can be claimed by filing an amended Form 941-X. For the first quarter of 2021, the maximum ERC credit is $7,000 per employee. During the second and third quarters, the maximum ERC credit is $7,500 per employee. However, there are some additional criteria employers must meet. Fortunately, a visual guide to determining eligibility is provided by the ERTC Decision Helper.
To determine whether or not an employer is eligible for the ERC, it is important to identify the business’s gross receipts. Gross receipts are defined as total amounts collected from all sources during an accounting period. This includes cash receipts, property receipts, and other deductible items. Also, some states and municipalities levy taxes on gross revenues.
If an employer is eligible, it can calculate gross receipts using either the first or the second quarter of the calendar year. When calculating gross receipts, the following items are not included: qualified sick and family leave wages, tax refunds, and gifts. Unless an employer is eligible, qualified sick and family leave wages cannot be used in calculating the employee retention credit.
Regardless of the method employed, an eligible employer can receive 70 percent of the qualifying wages paid in the quarterly quarter. However, gross receipts must be more than 80% of the previous calendar quarter.
Depending on the circumstances, an employer may be eligible to claim the ERC even if they received a Paycheck Protection Program loan. If this happens, an eligible employer must repay the PPP loan by May 14, 2020.
An alternative quarter election is available to employers, but it is not permanent. Rather, it is meant to help businesses understand the concept of the employee retention credit.
Wages paid after September 30, 2021 are no longer considered eligible wages
ERTC is a tax credit that is available to businesses that have fewer than 500 employees. The credit is equal to 50% of the first $10,000 in wages paid to employees during the period of the crisis. However, the IRS has released guidance clarifying the requirements for the ERC and the other benefits of ERTC.
For most businesses, the maximum credit is $5,000 per employee in the quarter. Additionally, a business that is severely financially distressed is allowed to claim a credit against all of its qualified wages. Qualified wages are defined in Section 3121(a) of the Internal Revenue Code. These wages are generally wages that are paid to employees who do not provide services. They can include cash tips and other compensation as long as it is properly allocable to the wages.
Another change to the ERTC program occurred when the Infrastructure and Investment Jobs Act was enacted. This Act added an additional category to the ERTC. It allows recovery startup businesses to claim an ERC, but only on wages paid during the fourth quarter of 2021.
However, if a business satisfies the gross receipts test, it will automatically qualify for the ERC every quarter. If an eligible employer has a total of more than 100 full-time employees, it is also allowed to treat wages paid to employees who are exempt from salaried status as qualified wages.
In addition, the IRS released guidance clarifying the documentation requirements for an eligible employer. This includes clarifications on how to interact with other deferrals. Affected taxpayers can also learn more about the employee retention tax credit by reviewing the IRS’s FAQ.
The Employee Retention Credit is a refundable tax credit. It is available to employers of all sizes, provided that they meet certain conditions. An eligible employer can claim a maximum credit of $700 or $7,000 in a single quarter. Employers can claim the credit against payroll taxes in addition to social security taxes.
There are other tax credits, such as the CARES Act, that are available to employers. These credits can help cover the cost of providing employees with paid sick and family leave.
Employers must reconcile the ERTC against the actual ERTC
If you are a business owner in Georgia and have been impacted by the COVID-19 pandemic, you may have heard of the Employee Retention Tax Credit (ERTC). The program was introduced by the Coronavirus Aid, Relief and Economic Security Act (CARES Act). It encourages employers to keep their employees on the payroll and pay them during the recovery period.
ERTC is a refundable tax credit that can be claimed by eligible employers. This credit reduces the employer’s overall salary deductions. In addition to qualifying wages, the ERTC also includes certain health insurance costs. However, the credit can only be taken for eligible wages that were not forgivable under the Paycheck Protection Program.
The General Appropriations Act included a number of changes to the ERTC rules. These changes extended the ERTC program until June 30, 2021. In order to receive the credit, an employer must file an amended Form 941-X. During this time, businesses will have up to three years to look back on their payroll and assess whether they qualify.
If your company qualifies for ERTC, you can receive credits of up to $7,000 per employee. For example, if your gross receipts for the year are $510,000, you can receive up to $7,500.
While it is important to make sure that you are filing the correct forms, you can use IRS guidance to ensure you understand the ERTC process. To avoid penalties, be sure to follow all instructions.
You can obtain a visual guide to determining your eligibility for ERTC by using the ERTC Decision Helper. Also, you can consult an accountant or payroll specialist to help you meet the requirements.
Businesses must file an amendment for each quarter, and can claim ERTC retroactively by filing an amended return. In addition, they must reconcile any excess credit on their Form 941. Expenses incurred outside of their PPP loans are not eligible for ERTC.
For additional guidance on ERTC, check out Notice 2021-49. It clarifies unanswered questions about the ERTC program. You will also find information about how to interact with other deferrals.
If you have any questions about the ERTC program or the IRS’s guidance, be sure to contact Frazier & Deeter.
Employers can elect to outsource the ERC tax credit process
If your business is a small employer in Georgia, you may be eligible to claim the Employee Retention Credit (ERC). The credit is a tax credit against certain payroll taxes. It is a refundable tax credit. However, a small employer can only claim the credit for qualified wages.
ERC eligibility criteria vary depending on the calendar year. In 2020, the maximum amount of credit is $5,000 for each employee. For 2021, the maximum is $7,000 per employee.
To qualify for the ERC, the business must have experienced a significant decline in gross receipts during the pandemic. Additionally, the business must have been affected by a governmental order that has caused a decline in its ability to operate.
Business owners and managers should understand the requirements to qualify. They must also know how the credit works. This can be tricky, but the assistance of a tax credit specialist can help. A tax credit specialist has the expertise necessary to ensure that the company is able to claim all of its ERC benefits.
The maximum refunded ERC amount is $21,000. If the credit exceeds this amount, it is paid directly to the employer. Also, if a business has higher payroll costs, it is able to claim additional payroll expenses in the form of a tax credit.
Employers with 500 or fewer full-time employees are considered small employers. Small employers are eligible for enhanced benefits under the ERC regime.
During the past year, the IRS has issued several clarifications regarding ERC eligibility. These included clarifying the definition of wages and addressing interaction with other deferrals. Further, the statute of limitations for the 2020 ERC does not close until April 15, 2024.
Businesses that took out PPP loans in 2020 may still claim the ERC. But, the wages paid during that period will not be included in the calculation of the ERC. There is an exception to the rule, though.
Businesses that are severely distressed can claim the ERTC for all of their wages during the qualifying period. The employer must demonstrate a decline in gross receipts of at least 90 percent.