Employee Retention Tax Credit
A refundable tax credit encouraging businesses financially impacted by COVID-19 to keep employees on their payroll.
BACKGROUND
The Employee Retention Tax Credit (ERC) is a refundable tax credit provided as part of the CARES Act to encourage employers to retain their employees during the COVID-19 pandemic. Many employers and various industries including lodging, retail, restaurants, dental and other medical, startups after February 15, 2020, and many others are eligible.
BENEFITS
- For 2020, ERC provides a maximum credit of $5,000 for each full-time equivalent employee.
- This credit is calculated at a rate of 50% of qualified wages up to $10,000 per eligible employee per year.
- Total maximum credit is $5,000 per employee for the 2020 calendar year.
- For 2021, ERC provides a maximum credit of $7,000 for the first three quarters for each full-time employee.
- This credit is calculated at a rate of 70% of qualified wages up to $10,000 per eligible employee per quarter.
- Total maximum credit is $21,000 per employee for the 2021 calendar year.
QUALIFICATIONS
- For 2020, Employers must have less than 100 full-time equivalent employees.
- For 2021, Employers must have less than 500 full-time equivalent employees.
ELIGIBILITY
Employers, including tax-exempt organizations, are eligible for the credit if they experience either:
- A full or partial suspension of business operations due to COVID-19 pandemic governmental orders, or
- A significant decline in gross revenue defined as a 50% decline in 2020, or a 20% decline in 2021 when compared to 2019.
CLAIMING THE ERC
If your organization was significantly affected by the COVID-19 pandemic, it may qualify for the ERC. A formal study is recommended to compare and summarize financials with quarterly revenue from 2019 until 2021.
HOW WE CAN HELP
ICS can provide a complimentary analysis of your organization to determine if the ERC credits can be beneficial. ICS has successfully claimed the ERC for numerous firms, having qualified millions of dollars in tax credits. Our comprehensive ERC study includes:
- Determining the quarters that qualify for the ERC, which includes analyzing whether the business was shut down in full or in part by an order issued by a government agency and/or determining if the business experienced the significant decline in revenue that meets the ERC requirements;
- Collecting quarterly wages paid by reviewing Form 941s, Employer’s Quarterly Federal Tax Return;
- Analyzing other factors that affect the ERC, such as taking Paycheck Protection Program (PPP) loans, using other payroll credits, and/or being treated as an essential business not affected by a government shutdown;
- Removing unqualified employees, such as certain business owners;
- Reviewing and adding allocable qualified health plan expenses;
- Calculating the ERC for each quarter; and
- Drafting Form 941Xs, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, to amend previous Form 941s; and
- Providing detailed filing instructions as well as audit support if the project is challenged by the IRS.
CASE STUDY
ICS secured $259,567 of employment credit for an assisted living community.
» Case Study
CLIENT SPOTLIGHT
Dr. Farideh Bagne, CEO. Magnolia by the Lakes. “We needed to stay open because people live here, which was challenging especially since we had to close our doors to visitors, family and friends. ICS did a fabulous job helping us claim these tax credits. Thank you.”
» Client Spotlight