The ERC calculation is based on total qualified wages, including health plan expenses paid by the employer to the employee. Credit is calculated differently depending on the year your company qualifies and the number of employees you have. The Employee Retention Credit (ERTC) was created as part of the CARES Act to encourage companies to continue to pay employees by granting a credit to the eligible employer for wages paid to eligible employees. The ERTC is a payroll tax credit (not an income tax credit) and will ultimately be declared on Form 941.In any calendar quarter in which the amount of the ERTC exceeds the OASDI taxes imposed on the employer, the excess is considered a refundable overpayment.
The Consolidated Appropriations Act provided a welcome amendment to the CARES Act by allowing all eligible employers to apply for the ERTC, even if they have received a PPP loan. The new guide explains that the choice is made simply without asking the ERTC for those specific salaries in the applicable return 941.Eligible wages under the ERTC for an eligible employer who is not considered a small employer are wages and health insurance benefits paid to an employee who is not providing services due to the effects of the pandemic. Eligible employers can apply for the ERTC by calculating the amount of the ERTC for a pay period and reducing the required payroll deposit by that amount. Any eligible salary that is taken into account in determining the allowable ERTC will not be counted as salary for the purposes of other tax credits and PPP loan forgiveness.
The Employee Retention Tax Credit (ERTC) was created as part of the CARES Act to encourage companies to continue paying employees by granting a credit to the eligible employer for wages paid to eligible employees. Also note that receiving a Paycheck Protection Program (PPP) loan in either round does NOT prohibit your organization from taking advantage of the ERTC if you meet the necessary requirements, although no salary used for the ERTC can be used to forgive PPP loans. Paren Knadjian (practice leader, M%26A and Capital Markets), Stacey Korman, public accountant (director), Sossi Bekarian, CPA (senior manager) and Jeff Kamin, CPA (accounting manager, ERTC) organized a second session of the webinar on employee retention credits from the PPP Second Draw Program %26.Learn more about the employee retention tax credit and hear the story and perspective of an organization that has used and benefited from the ERTC in this episode of The Wrap podcast. It is important to note that the ERTC is subject to income tax because the employer's aggregated wage deductions are reduced by the amount of the credit.
The Employee Retention Tax Credit (ERTC), often simply referred to as ERC, confuses many nonprofit employers. Eligible wages under the ERTC for a small employer are all wages and health insurance benefits paid to an employee during the period when the employer is considered an eligible employer.