What is the Employee Retention Tax Credit? Do I need an attorney to receive these credits?
The Employee Retention Tax Credit (ERTC) is a tax credit introduced by the United States government as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, and subsequently extended and modified by subsequent legislation.
The ERTC is designed to provide financial support to businesses that have been negatively impacted by the COVID-19 pandemic and encourage them to retain their employees. It provides a tax credit of up to 70% of the wages paid to each eligible employee, up to a maximum of $10,000 in wages per employee per quarter.
To be eligible for the ERTC, businesses must have experienced either a full or partial suspension of their operations due to a government order related to COVID-19 or a significant decline in revenue due to the pandemic. The credit is available to businesses of all sizes, including non-profits, but certain restrictions apply based on the number of employees and the amount of revenue earned by the business.
The ERTC has been extended and modified several times since its introduction, most recently by the Consolidated Appropriations Act, 2021 (CAA) and the American Rescue Plan Act (ARPA) of 2021. It is now available through the end of 2021 and includes additional eligibility criteria and increased credit amounts for certain businesses.
An employer can file retroactively for the Employee Retention Tax Credit (ERTC) if they were eligible but did not claim the credit in a previous tax year. As per the IRS guidance, eligible employers can file amended employment tax returns, Form 941-X, to claim the ERTC for qualified wages paid in the past. The deadline to file an amended Form 941 is three years from the date the original Form 941 was filed or two years from the date the employer paid the taxes reported on the original Form 941, whichever is later. It's recommended to consult a tax professional or an accountant to determine eligibility and to help with the application process.
While you don't need an attorney to apply for or receive the ERTC, it may be helpful to consult with a tax professional to ensure that you meet all the eligibility criteria and to help you with the application process. The IRS website also offers guidance and resources on the ERTC.