Here's Everything You Need To Know About The Employee Retention Tax Credit.

Free Money, come and get it while it’s hot! That’s what seems to be the rallying cry for the Employee Retention Tax Credit. And while yes, it is a great opportunity for those businesses hit hard by the COVID Pandemic, it’s important you understand what’s needed to get the credit filed properly, and on time. Here’s a breakdown of what you need to know, and where to get the best information about it today.?

What is the Employee Retention Tax Credit?

The Employee Retention Tax Credit. (or the ERTC) is a new law passed as a part of the CARES Act of 2022, and encourages employers to keep their employees on their payroll.

Does My Business Qualify for the Employee Retention Tax Credit?

There are only a few things you need to qualify. If you can answer yes to these questions below, you do!?

Are your gross receipts down 20% from q1 2019 to q1 2021?

This is easy enough, simply take the gross revenue you received as a business in each quarter, and subtract. Did you lose more than 20%? If so, you qualify.?

Are your gross receipts down 20% from q4 2019 to q4 2020?

Same as the above.?

Do you have less than 500 employees?

Employees means 1040 employees or 1099 employees. Some contractors can also be included, and you can see the details here: https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

Did you still have employees in 2021?

You must have had employed in 2021 to be eligible for this tax credit.?

What do I need to do to get an employee retention tax credit?

File form 941, or 941-X with the IRS.?

You can find a copy of the form HEREhttps://www.irs.gov/pub/irs-pdf/f941.pdf

How much money will I get from filing the Employee Retention Tax Credit?

You can write off a maximum of $10,000 in wages per employee,per quarter,? multiplied by 70% ($7,000)?

This credit will directly reduce your taxes owed to the IRS, and can even result in a return!

To get this Credit in cash, as soon as possible, the IRS says this:

“

In anticipation of receiving the Employee Retention Credit, Eligible Employers can fund qualified wages by: (1) accessing federal employment taxes, including withheld taxes that are required to be deposited with the IRS, and (2) requesting an advance of the credit from the IRS for the amount of the credit that is not funded by accessing the federal employment tax deposits, by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.

“

Let’s take a look at a few fun examples.

Say you run a small bowling alley in town that has 4 employees. They’re all part time, and each makes about $1,000 a month. ( for simplicity, let’s say the $1,000 included taxes and withholding) that’s $4,000 a month in gross wages, and $12,000 a quarter, and a grand total for the year of $48,000.?

Taking that $12,000 per quarter and reducing it to our max ($10,000) and multiplying by 70% gets us a $7,000 tax credit per quarter. That’s a grand total of $28,000 in tax credits (Remember, credits are real money coming back to you, or directly off your taxes owed to the IRS) for a small bowling alley with 4 part time employees.?

This tax credit can truly mean sink or swim for many small businesses. If you need assistance filing this form, or with any other business tax consultation needs, please contact us at https://h-mconsulting.com/contact-us/? for a free assessment.?