In order to assist eligible employers in keeping their staff members during the COVID-19 pandemic, the government offers the Employee Retention Credit (ERC), a tax credit. The ERC is intended to encourage employers to keep workers on board even when their company is shut down or facing severe financial difficulties as a result of the pandemic.
The American Rescue Plan Act of 2021 allows eligible employers to receive an advance payment of the credit in addition to the regular ERC, making it simpler for them to retain their staff and pay their bills during these difficult times.
For whom is the Employee Retention Credit Advance available?
Employers must fulfill specific requirements in order to be eligible for the ERC, such as:
The employer’s business must have been completely or partially shut down as a result of a COVID-19-related government order, or its gross receipts must have fallen more than 50% from the same quarter the previous year.
A Paycheck Protection Program (PPP) loan must not have been received by an eligible employer during the time they are claiming the ERC, and they must also have fewer than 500 workers.
How to determine the amount of the employee retention credit advance
Up to a maximum of $10,000 per employee per year, the ERC is equal to 50% of the qualified wages paid to each employee. You will need to know the total number of employees and the total amount of eligible wages paid in order to determine the credit amount.
How to submit an application for an employee retention credit advance
The steps listed below must be taken by eligible employers in order to apply for the ERC advance payment:
•Establish eligibility: Based on the standards established by the IRS, ascertain whether you are an eligible employer.
•Calculate the credit amount: Based on the number of employees and the eligible wages, determine the credit amount.
•Apply for advance payment: Employers can apply for advance payment of the credit by sending Form 7200, Advance Payment of Employer Credits Due to Covid-19.
•Give details and supporting documentation: Whenever the IRS requests it, provide the information and documentation they require, such as proof of eligibility and proof of wages paid.
•Receive advance payment: The employer will get the money as soon as the application is approved.
What to consider before submitting an application for an Employee Retention Credit Advance?
Based on the laws in effect at the time and IRS regulations, the ERC’s advance payment may change. To make sure the data is current, it’s crucial to review the IRS’s most recent guidance.
Employers are required to maintain complete records of their eligible wages for a minimum of four years in case an audit is conducted.
Employers who receive an advance payment of the ERC are still required to file regular tax returns and claim the credit.
The advance payment must be returned if the employer’s circumstances change and they are no longer qualified for the ERC.
In order to keep their staff during the COVID-19 pandemic, eligible employers should take advantage of the Employee Retention Credit Advance. Eligible employers can receive an advance payment of the credit and help pay their expenses during these difficult times by following the IRS-outlined procedures.