Employee Retention Credit Deadline 2022 - How to File for the ERC Tax Credits
Companies are no longer able to pay wages in order to qualify for tax credits for Employee Retention Tax Credit, however, they will have till 2024 and, in certain instances , 2025, to take an audit of their payrolls prior to the pandemic. They can claim retroactively the tax credit through filing the amended form of tax returns.
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Businesses are given until April 15 2024 to file amended tax returns for Q2 3 and 4 of 2020. They will have until April 15th, 2025 to submit revised returns in all quarters in 2021. Furthermore, various legislations have come into force since the start of the ERTC program that affect the way the credit is used.
What exactly is an Employee Retention Credit?
The ERTC is a credit that is refundable which businesses can claim against eligible wages which includes certain health insurance premiums which are paid to employees.
The American Rescue Plan Act stipulates that the non-refundable portions of the retention tax credit will be claimed against Medicare taxes, instead of Social Security taxes as they were in 2020. This change, however, will only be applicable to wages that are paid following June 30th, 2021, and does not alter the amount of credit. If the credit is greater than the liability of the employer's total for the portion of Social Security or Medicare, in the event that it is paid prior to July 30, 2021, or later during any quarter of the calendar, then that difference will be refunded to the company.
How can a company claim the Tax Credit for Employee Retention Retroactively?
It is important to note that the IRS Notice 2021-20 provides guidance to employers that are seeking to claim the tax credit for retention of employees.
In the notice is information on the way employers who took advantage of an PPP loan are able to claim the retention tax credit. To claim the credit from previous periods, employers must file Form 941-X, Adjusted Employee's Quarterly Federal Tax Return, or claim for Refund for the relevant quarter(s) during which tax-deductible wages are paid.
Many employers such as hospitals, colleges, universities along with 501(c) organizations after the passage in the American Rescue Plan Act, may be eligible for the credit. In the past it was the case that it was the Consolidated Appropriations Act expanded qualifications to include businesses that have taken out a loan through the Paycheck Protection Program (PPP) which includes borrowers from the first round of PPP that were initially ineligible to take advantage of tax credits. tax credit.
A business or trade which was partially or fully suspended or required to cut the hours of operation due to an order from the government. The credit only applies to the quarter in which in which the company is suspended, not for the whole period.
They are considered to be essential as long as they do not have a supplies of essential materials or goods that have been disrupted in a way that impacts their ability to to run.
Businesses that were shut down are can continue to run their business in a majority intact by the use of telework.
Significant drop on gross receipts - The IRS has released Revenue Procedure 2021-33 in August. 2021. The procedure offers a safe harbor in which an employer can exempt the amount of repayment of a PPP loan as well as any amount from a shuttered Venue Operators Grant , or restaurant Revitalization Funds grant out of the scope of gross receipts solely for the purposes of determining the eligibility to be eligible for the ERTC.
CARES Act - 2020
If you have greater than 100 full-time workers can only claim the approved wages of employees who do not provide services due to loss of business or suspension. In general, generally, gross receipts in a calendar quarter are lower than 50 percent from gross receipts when compared to the same quarter in 2019 for an employer, they will be eligible.
What wages count towards how much retention credits are allowed?
In general, wages and compensation which will be taxed under FICA taxes and qualified health expenses are eligible for the retention tax credit.
In determining eligible health expenses for a qualified health expense, the IRS offers a variety of methods for formulating the figure based on the particular circumstances.
Employers who have 100 or less full-time workers can take advantage of all employees' wages that are paid to employees and the time when they are not working, except for paid leave by the Families First Coronavirus Response Act.
Tip Wages Are Included in the Qualified Wages
IRS Notice 2021-49 clarified the fact that tips could be considered qualified wages in the event that they were wages included FICA.