Business owners need be aware of details surrounding the Employee Retention Credit (ERC). Created within The CARES Act that was rolled out earlier on during the COVID-19 crisis, the ERC provides a payroll tax credit for owners who continue to pay employees during a quarter while their business was not fully operational due to the pandemic. The credit is also available to those who saw a significant decline in gross receipts due to the pandemic.
For the entire year of 2021, the credit is refundable and capped at 70% of qualified wages and certain health insurance coverage up to $10,000 per employee. For quarters one and two of 2021, the credit applies to your business’ Social Security tax. For quarters three and four of 2021, the credit applies to your business’ Medicare tax. The credit is capped at $7,000 per quarter per employee. This should be claimed on your quarterly payroll report, Form 941.
If your business participated in the Paycheck Protection Program (PPP) and used the proceeds of your PPP loan to pay eligible costs, you can still claim the ERC. If your PPP loan was forgiven, the wages paid with the proceeds are not qualified wages for the credit.
If you have questions about the ERC, please reach out to our Business Services & Solutions Team. This is here for you to take advantage of to reap savings. We can help you do just that.