What is the Employee Retention Credit?
The Employee Retention Credit (ERC) is a refundable tax credit for employers. If you do not have W-2 reportable employees, you will not qualify for this credit.
This refundable credit is claimed against employment taxes (Form 941) using Form 941-X (Amended Form 941). There have been three amendments to the ERC creating different requirements and limitations for the period between 2020 and 2021.
Employee Retention Credit Deadline
The deadline to claim the ERC is three (3) years after the due date of the original filed Form 941.
Example: Quarter 2, 2020 Form 941 due date: July 31, 2020
Deadline to file Form 941-X for Quarter 2, 2020: July 31, 2023
Credit Availability Periods
The ERC is available for most employers who filed a Form 941 between 2020 and 2021. The first return that can be considered for the credit is the second quarter 2020 Form 941. In addition, Congress eliminated most of the business opportunities to claim the ERC for the third and fourth quarter of 2021. There are also different requirements and limitations for the approved filing periods.
2020 Revenue Qualifications and Credit Amount (Cares Act of 2020)
Business operations that were fully or partially suspended due to government orders, or gross receipts in 2020 were less than 50% of your gross receipts from 2019 most likely qualify.
Other stipulations to be considered
The maximum ERC is equal to 50% of $10,000 in qualified wages (which includes certain health care costs) to employees. Qualified wages are limited to a maximum of $10,000 of wages per employee to calculate the 50% credit. Therefore, the maximum credit available is $5,000 per employee, per year.
• Applies to Non-Government Employers ONLY
2021 Revenue Qualifications and Credit Amount (Relief and American Plan Rescue Acts of 2021)
Business operations that were fully or partially suspended due to government orders, or gross receipts in 2021 were less than 80% of your gross receipts from 2019 most likely qualify. Other stipulations to be considered
For 2021, the ERC increased to a maximum of 70% of $10,000 in qualified wages (which includes certain health care costs) to employees. Again, this credit is limited to $10,000 of wages per employee when calculating the 70% credit. The maximum credit available is $7,000 per employee, per quarter for the first three quarters in most cases ($21,000 per employee, per year).
• Includes Certain Government Employers
WVFA will be conducting regional Loggers Council meetings in the near future to inform members more fully about how to go about applying for the credit. Please watch for meeting announcements in the WVFA Weekly Update.