The ERTC is a refundable tax credit. The ERTC is a refundable credit that companies can request on qualifying salaries, including certain health insurance costs, paid to employees. The Employee Retention Tax Credit (ERTC), another part of the CARES Act, was designed to encourage companies to keep employees on the payroll during the COVID-19 pandemic. In addition, since the creation of the ERTC program, several laws have come into force that influence the way in which credit can be requested.
The IRS has developed a plan to allow eligible businesses to receive an advance payment on their credit. The Employee Retention Tax Credit (ERTC) is one of the many relief provisions included in the CARES Act to encourage small businesses to keep employees on their workforce instead of suspending or firing them. The notice includes guidance on how employers who received a PPP loan can retroactively apply for the employee retention tax credit. Remember that the credit can only be deducted for salaries that are not forgiven or that are expected to be forgiven under the PPP.
Employers who use a Professional Employers Organization (PEO) or a Certified Professional Employer Organization (CPEO) do not file an individual 941 on their behalf, so it's important that they understand how they would reconcile this information and receive credit. Previously, the Consolidated Appropriations Act expanded the requirements to include companies that applied for a loan under the Paycheck Protection Program (PPP), including borrowers from the initial round of the PPP who were not originally eligible to apply for the tax credit. This law increased the employee limit to 500 to determine what salaries are applicable to the credit. In addition, employers cannot claim employees and their wages twice in connection with the Family and Medical Leave Act (FMLA) and the Work Opportunity Tax Credit.
Keep in mind that employers who receive a loan from the Check Protection Program (PPP) are not eligible for the employee retention tax credit. While the Employee Retention Tax Credit (ERTC) program has officially expired, this does not affect a company's ability to apply for the ERTC retroactively. 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. One of the most important changes to the law is that the Employee Retention Tax Credit (ERTC) is now available to employers who previously received or will receive a loan from the Check Protection Program (PPP).
Most employers, including colleges, universities, hospitals and 501 (c) organizations after the enactment of the United States Rescue Plan Act, could be eligible for credit.