Are only full time employees eligible for employee retention credit?

The ERTC is a repayable credit that companies can apply for with qualified salaries, including certain health insurance costs, which are paid to employees. Primarily, the IRS states that qualified wages are determined by the number of full-time employees an eligible employer has.

Are only full time employees eligible for employee retention credit?

The ERTC is a repayable credit that companies can apply for with qualified salaries, including certain health insurance costs, which are paid to employees. Primarily, the IRS states that qualified wages are determined by the number of full-time employees an eligible employer has. An eligible employer can choose not to accept the credit by not claiming it on the quarterly employment tax return. The amounts paid to authorized real estate agents of the real estate brokerage firm Y do not constitute wages within the meaning of section 3121 (a) of the Code and are therefore not qualified wages for the purposes of the employee retention credit.

Although the Employee Retention Tax Credit (ERTC) program has officially expired, this does not affect a company's ability to apply for the ERTC retroactively. Reasonable methods include the method (or methods) that the employer uses to measure the right of exempt employees to leave with an intermittent or reduced leave program under the Family and Medical Leave Act, or the method used by the employer to measure the right of exempt employees to and the use of paid leave according to the employer's usual practices. Payments, including severance pay, made to a former employee after the termination of employment are not considered qualified wages for the purposes of the employee retention credit. Employers with 100 or fewer full-time employees can use all the salaries of working employees, as well as any paid time off work, with the exception of paid vacation provided for in the Families First Coronavirus Response Act.

The amount of the credit is calculated based on a percentage of “qualified wages”, including the allowable expenses of the qualified health plan that an eligible employer pays to employees. Eligible employers, including PPP beneficiaries, can apply for a credit against 70% of qualified wages paid. The minister's salary and parish allowance do not constitute salaries within the meaning of section 3121 (a) of the Code and are therefore not qualified wages for the purposes of the employee retention credit. Wages paid to employees for the hours during which they provided services are not considered qualified wages for the purposes of the employee retention credit.

Employer Z can treat as qualified wages the amounts that its employees contribute as pre-tax wage reduction contributions to the qualified 401 (k) plan because those amounts are salaries within the meaning of section 3121 (a) of the Code. This change will encourage employers to continue paying for health plan expenses for licensed employees. There is still time to apply for the ERC retroactively by filing Form 941-X (employer's adjusted quarterly federal tax return or refund request).

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