If you are a business owner and want to be eligible to apply for the ETC, you need to make sure you have the right qualifications. This will help you get the grant that you deserve and you can be more confident about applying.
Apply on Justworks
The Employee Retention Credit (ERC) is a tax credit awarded to employers that maintain a full-time employee. It is a refundable tax credit, worth 50% of the employee's earnings. In order to qualify, an employer must meet certain eligibility criteria.
One of the best ways to claim the ERC is by enrolling in a PEO, such as Justworks. To qualify, you must meet minimum requirements including having at least two employees that are eligible for health coverage and being able to pay for it. A good PEO can help you manage your human resources policies and give you a competitive rate on your health insurance.
You will also need to have a solid grasp of the insurance industry. The Justworks service center will help you navigate the maze of health insurance options. They can even provide you with a quote for your specific situation.
A small startup can claim the credit as early as July 1, 2021. However, the credit is only available to companies that qualify for it. As such, you may need to hire an experienced professional to help you navigate this minefield.
While you are at it, make sure you choose the right one. You don't want to get stuck with a low-quality PEO. Plus, if you can't qualify for an ERTC, you might find yourself getting hit with penalties from the IRS.
Finally, do your homework on the ERC's eligibility rules. If your company is still in the planning stages, it might be best to consult a qualified professional before you sign on the dotted line. There are several reasons why your small business might not be eligible for an ERTC. For example, your company could be classified as a Recovery Startup Business. Alternatively, you may not be allowed to claim the credit because of COVID-19 restrictions. Make sure you are on the right track by contacting an ERTC expert at your earliest convenience.
Remember to ask the Justworks service center for the best quotes for your needs. They will be able to provide you with the aforementioned e-book and the best rates on your health insurance.
Qualify under RSB reason
Taking advantage of the Recovery Startup Business (RSB) tax credit will provide an incentive to new businesses. There are many details to be considered, however. A Recovery Startup Business is a new business that has average annual gross receipts of less than one million dollars over the past three years. It must be started after February 15, 2020 and must be operational by October 1, 2021.
The RSB has many features and benefits, including tax credits, incentives, and business loans. But there are a few pitfalls to watch out for. If you're considering taking advantage of the RSB tax credit, make sure to validate your eligibility by speaking with a tax expert.
The RSB has one major caveat: you can't claim a credit if your business has ceased operations. This includes full or partial closures due to government orders. However, if your business was deemed a small business for reasons other than government mandates, you may be eligible for the RSB tax credit.
You can also qualify for the ERTC (employee retention tax credit) if you're part of a group of employers with 500 or fewer employees. Depending on your situation, you may need to take into account the employees of your related entities. For example, if your business is related to an organization that provides services to your customers, you will need to take into account the wages of these individuals in addition to your own.
Finally, the ERC is a tax credit that must be claimed against Medicare taxes instead of Social Security taxes. In addition to the credit, you need to show that you've used a valid method to qualify. Using the correct IRS filing method is essential, as the IRS will deny you a refund if you've missed the deadline. Fortunately, the IRS will provide a free online tool that lets you calculate the corresponding taxable gross receipts. Alternatively, you can hire a payroll services provider to assist you.
The best part is that if you're a small business that is considering taking advantage of the RSB tax incentive, you can qualify for a maximum credit of $50,000 per quarter, for up to 2021.
Qualify for decline in gross receipts
If your business experiences a significant decline in gross receipts, you may qualify for the employee retention credit under the CARES Act. This is a refundable tax credit available to small businesses. Depending on the circumstances, you may be eligible for as much as $7,000 per quarter. However, there are some requirements that you must meet in order to qualify.
The first requirement is that your business must have experienced a significant decline in gross receipts for the 2020 calendar quarter. You can also choose to use the quarter before to qualify. For example, if your business experienced a 20% reduction in gross receipts for the first quarter of 2021 compared to the first quarter of 2019, you would qualify for the ERC for the second quarter of 2021.
In addition to having significant gross receipts, you must also have qualified wages. This includes all employees in your organization, even those who do not provide any services. Qualified wages are those wages that are paid during the period of operations suspension.
While the CARES Act does not require a significant decline in gross receipts to be due to COVID-19, it does say that businesses that experience a significant drop in gross receipts must have experienced a critical material disruption that caused their ability to operate to be affected. That means that the impact of a shutdown, forced closure or quarantine on your business must have been a substantial factor in causing a decline.
Businesses that experience a significant drop in gross receipts in 2020 can claim an employee retention credit. However, this type of credit is not available to businesses that are recovering from a prior disaster. If you are in this situation, you should check the IRS's FAQ for additional information.
Regardless of whether you qualify for the employee retention credit, you should make sure that your employment taxes are accurate. Your records should be available for at least four years in case the IRS needs to review them. Depending on the nature of your business, you may be required to submit Form 941-X to report any changes in employment taxes.
Maintain records to substantiate eligibility
Employers must maintain records to substantiate their eligibility for the Employee Retention Tax Credit (ERTC). This credit is available for businesses that maintain a payroll for employees. The IRS has recently released formal guidance for ERC qualifications. These guidelines align with the intent of the pandemic relief package.
One of the first qualifying factors for ERC is a significant decline in gross receipts. For 2020 and 2021, the drop must be more than 20%. There are also several other factors to consider.
PEOs must maintain records to substantiate their ERC claims. Records must include information related to client customer and PPP loans. Also, the records should be kept for four years from the date the tax becomes due.
If you are considering claiming the ERTC in the year 2020, you should consider reviewing your payroll information and headcount to ensure you are eligible for the credit. In addition, you should review your financial records for the year 2019. Keeping a record of expenses will help you identify qualified wages.
The employee retention credit can help you keep your employees on payroll during a pandemic. As part of the program, you are able to claim a refundable tax credit of half of the qualified wages paid. It cannot be combined with other tax credits or PPP loans.
For businesses, the amount of wages that are eligible for the credit has increased. Now, employers can claim up to $10,000 per employee in a given quarter.
In addition, a restaurant owner can qualify for the ERC even if their business is online. A partial closure is another option for qualifying for the credit. You may qualify if you closed your dining room or if your company's operations were suspended. However, you must still meet the requirements of the partial closure test.
Finally, if you are a Recovery Startup Business, you can qualify for the credit. However, this credit will only be available starting October 1, 2021.
For companies that have a PPP loan, they may be able to claim ERTC credits on their own. However, they will need to pay back the loan by the date the applicable employment tax return is due.