According to the IRS, approximately 70% – 80% of small and medium businesses (as well as tens of thousands of charities) could be eligible to take advantage of the Employee Retention Tax Credit (ERTC).
The ERTC was enacted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and provides relief to eligible business owners in a refundable tax credit to cut down their federal tax bill.
The tax credit provides relief for business owners that lost revenue in 2020 and 2021 as a result of the pandemic. Eligible businesses kept their employees on payroll and/or incurred health plan expenses during the COVID-19 pandemic.
Eligible companies can receive as much as $7,000 per employee per quarter for four quarters in 2021, which equals $28,000 per employee. Businesses might also qualify for a break of $5,000 per employee for all of 2020.
Your business could be eligible for the credit if it was ordered by a local government to fully or partially shut down, your gross receipts for a single quarter of 2020 fell by 50% versus the same quarter of 2019 (for the 2020 tax credit), or gross receipts for a single quarter of 2021 decreased by 20% versus the same quarter of 2019 (for the 2021 tax credit).
If your company was not in business in 2019, you could use a corresponding quarter in 2020 to show you had a revenue reduction between 2020 and 2021 and qualify for the ERTC.
The law also now allows employers who received Paycheck Protection Program (PPP) loans to claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan.
Government agencies or sole proprietors without employees are not eligible.
Nonprofit, tax-exempt organizations are eligible for this credit if they are engaged in a trade or business. For example, eligible nonprofits can include hospitals, schools, museums and performing arts centers.
If you believe your company or nonprofit organization is eligible, speak with your accountant and/or your payroll preparer.
To learn more about this credit, visit the IRS webpage here or the US Chamber of Commerce webpage here.
Information contained on this page and linked pages is subject to change. All information, documents, and resource links provided by the Idaho Department of Commerce are for information purposes only. Please consult with your financial advisors for recommendations specific to your business or organization.