What is the refundable portion of employee retention credit?

The employee retention credit under the CARES Act encourages companies to keep employees on their payroll. The ERTC is a refundable credit that companies can request on qualifying salaries, including certain health insurance costs, paid to employees. Small employers receive greater benefits under the ERC regime. Specifically, for as long as they are an eligible employer, they can include wages paid to all employees.

Large employers can only include salaries paid to employees for not providing services. Technically, yes, but you only pay salaries that meet the requirements while the terms of office are in effect and have a more than nominal impact on the company. Instead, the employer must reduce wage deductions on their income tax return for the tax year in which they are an eligible employer for the purposes of the ERC. The employee retention credit is a fully refundable tax credit that eligible employers request to cover certain payroll taxes.

It's not a loan and doesn't have to be repaid. For most taxpayers, the refundable credit exceeds the payroll taxes paid in a credit-generating period. While an employer cannot include salaries financed by a PPP loan in the ERC calculation, PPP funds only apply to eight to ten weeks of wage expenses. ERC eligibility periods are longer.

PPP loans can also finance non-wage expenses. No, but, if possible, allocate the maximum allowable non-wage costs to the waiver of the PPP. It is likely that the fund's sister holding companies can be treated as separate operations or businesses when considering the status of an eligible employer, since the Fund owned by the holding companies is not an active operation or business (rather a passive investment vehicle). Cherry Bekaert LLP and Cherry Bekaert Advisory LLC practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws, regulations and professional standards.

Cherry Bekaert LLP is an independent, certified public accounting firm that provides certification services to its clients, and Cherry Bekaert Advisory LLC and its subsidiaries provide tax and business advisory services to their clients. Cherry Bekaert Advisory LLC and its subsidiary entities are not authorized public accounting firms. The entities that belong to the Cherry Bekaert brand are independently owned and are not responsible for the services provided by any other entity that provides services under the Cherry Bekaert brand. Our use of the terms “our firm” and “we” and terms of similar meaning denote the alternative practice structure of Cherry Bekaert LLP and Cherry Bekaert Advisory LLC.

If the credit is non-refundable and exceeds the tax burden, you lose the franchise in a recovery startup. The amount of corporate Social Security tax allocated to the non-refundable element of sickness and parental leave benefits also limits the ERC. An eligible employer is considered to choose to exclude the qualifying salaries stated in the employer's PPP loan forgiveness application for purposes of applying for the ERC. When completing Form B, if you have 100 full-time employees or fewer, you must apply the non-refundable partial assistance credit for the full quarter to the obligation of the first payroll payment of a month, no less than zero.

The non-refundable part of the ERC simply reduces the amount of tax payable to zero; a non-refundable tax credit does not result in a return. This law allowed some of the most affected companies, employers with severe financial difficulties, to claim the credit against the qualified salaries of all employees, rather than just those who did not provide services. Similarly, keeping track of acceptable earnings and the total credit allowed in each pay period reduces the risk of penalties if the employer deposits less than the required amount. This is because the company's revenues have fallen and the reduction in tax payments has freed up finances so that it can continue to operate and pay employees.

Employers who use a Professional Employers Organization (PEO) or Certified Professional Employer Organization (CPEO) don't file an individual Form 941 on their behalf, so it's important that they understand how they would reconcile this information and receive credit. The employee retention credit (ERC) is a tax credit available to employers who have seen a reduction in their gross income due to the coronavirus pandemic. The IRS has barriers to prevent wage increases from being factored into the credit once the employer is eligible for the employee retention tax credit. On Form 7200, you can apply for a credit for paid sick time, parental leave, loan forgiveness, health plan costs, and the portion of Medicare taxes paid by the employer.

For more information on the employee retention credit, visit Cherry Bekaert's ERC Guidance Center or contact Martin Karamon. If an employer determines that you were an eligible employer during a previous quarter in which you did not apply for the ERC, you can apply for the credit retroactively by filing an adjusted quarterly federal tax return from the employer or a request for reimbursement on the IRS Form 941-X. .

Dustin Hafferkamp
Dustin Hafferkamp

Incurable pop culture enthusiast. Unapologetic pop culture practitioner. Hardcore travel advocate. Certified tv enthusiast. Lifelong food junkie.

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