The Employee Retention Credit (ERC) is a fully refundable tax credit that eligible employers can request to cover certain payroll taxes. It's not a loan and doesn't have to be repaid. This credit is designed to help employers who have been affected by the coronavirus pandemic, and it can be applied to the portion of payroll taxes paid by the employer. The IRS has also developed a plan to allow eligible businesses to receive an advance payment on their credit.
The Consolidated Appropriations Act expanded the requirements for the ERC, allowing some employers most affected by financial difficulties to claim the credit against the qualified salaries of all their employees, rather than just those who did not provide services. Companies that had to suspend some or all of their operations due to government restrictions related to COVID-19 or companies that lost 50% of their gross revenues in the same quarter of the previous year qualified for the ERC. Eligible employers should expect to receive the credit so that they can use the funds that would normally be withheld to cover employees' qualifying salaries. To apply for the ERTC, eligible employers must report quarterly their total qualified wages and any related credits.
Keep in mind that employers who receive a loan from the Check Protection Program (PPP) are not eligible for the employee retention tax credit. The IRS has protective measures to prevent wage increases from being counted for the credit once the employer is eligible to receive the employee retention tax credit. The prepayment of any part of the ERC received by an employer that exceeds the amount to which the employer is entitled is an erroneous refund that the employer must reimburse. Employers are not required to take advantage of the employee retention tax credit, and some may choose to fire or furlough their employees instead of paying qualified wages and applying for the ERTC. In conclusion, it's important to understand that while the Employee Retention Tax Credit (ERTC) program has officially expired, this does not affect a company's ability to apply for it retroactively.
The ERTC is a fully refundable credit that companies can request on qualifying salaries, including certain health insurance costs, paid to employees. This law allowed some employers most affected by financial difficulties to be able to claim the credit against the qualified salaries of all their employees, rather than just those who did not provide services.