Sometimes, reading all the details of tax programs can be overwhelming. Here’s a brief summary of the Employee Retention Tax Credit. It is a refundable credit against some employment taxes with a limit of 50% of qualified wages. This applies to wages paid between 3/12/20 and 1/1/21.
Let’s make sure you’re an eligible employer:
1. You have not received a Paycheck Protection Program Loan.
2. You operate a trade or business during calendar year 2020.
3. You have experienced one of the following:
a. Full or partial suspension of business operations due to government orders.
b. A significant decline in gross receipts (50% or below prior year receipts); operating at 80% of prior year receipts is considered operating without a decline.
What are qualified wages? If you have 100 or fewer full time employees during 2019, then qualified wages and healthcare costs up to $10,000 per employee that were paid during the business suspension or gross receipts decline.
How do you claim the tax credit? You claim it on your quarterly federal employment tax form; for most employers this is form 941. You can actually reduce your payroll tax deposits during the quarter in anticipation of claiming the tax credit.