The employee retention credit under the CARES Act encourages companies to keep employees on their payroll. The ERTC is a repayable credit that companies can apply for with qualified salaries, including certain health insurance costs, which are paid to employees. An eligible employer could reduce their employment tax deposits during the quarter by the expected credit amount for the quarter. Companies can no longer pay salaries to apply for the employee retention tax credit, but they have until 2024, and in some cases, 2025, to review their payroll during the pandemic and apply for the credit retroactively by filing an amended tax return.
The credit is allowed against employer participation in social security taxes under section 3111 (a) of the Internal Revenue Code (the “Code”) and the portion of taxes imposed on railroad employers under section 3221 (a) of the Railroad Retirement Tax Act (RRTA) that corresponds to social security taxes under section 3111 (a) of the Code. Also, remember that if a customer has applied for and will be forgiven for a PPP loan, they may now be entitled to the employee retention credit on certain salaries. ERC Today is an employee retention credit service that helps companies assess their eligibility, completes a thorough analysis of their application, provides guidance on the application process and documentation, provides specific knowledge about programs that a regular public accountant or payroll processor may not be familiar with, and executes a quick and smooth process from start to finish, from eligibility to requesting and receiving refunds. The employee retention credit is equal to 50 percent of qualified wages (including qualified health plan expenses) paid by an eligible employer in a calendar quarter.
In the case of companies that have recorded a significant decrease in their gross revenues or that have closed their doors due to COVID-19, all salaries paid to employees are considered qualified wages. Employers who file an annual payroll tax return can file an amended return using Form 944-X (Employer's Adjusted Annual Federal Tax Return or Refund Request) or Form 943-X (Employer's Adjusted Annual Federal Tax Return for Agricultural Employees or Refund Request) to apply for credits. The IRS has established barriers to avoid wage increases that would be included in the credit once the employer is eligible for the employee retention tax credit. If the amount of the credit exceeded the employer's share of those federal employment taxes, the franchise was treated as an overpayment and the employer was reimbursed.
The Coronavirus Aid, Relief and Economic Security Act (CARES) created the ERTC to help companies keep employees on payroll. The employer could withhold the federal income tax withheld from employees, employee participation in social security and Medicare taxes, and the employer's share in social security and Medicare taxes with respect to all employees. In determining the qualifying wages that may be included, the employer must first determine the number of full-time employees. For more information, see Determining which employers are eligible to apply for the employee retention credit.
Most employers, including schools, universities, hospitals and 501 (c) organizations following the enactment of the U.S. Rescue Plan Act, could qualify for the credit. The notice includes guidance on how employers who received a PPP loan can retroactively apply for the employee retention tax credit. .