When the Covid-19 pandemic began, and businesses were forced to shut down their operations, Congress passed programs to provide financial assistance to companies. One of these programs was the employee retention credit (ERC).

The ERC gives eligible employers payroll tax credits for wages and health insurance paid to employees. However, when the Infrastructure Investment and Jobs Act was signed into law in November 2021, it put an end to the ERC program.

Despite the end of the program, businesses still have the opportunity to claim ERC for up to three years retroactively. Here is an overview of how the program works and how to claim this credit for your business.

Originally available from March 13, 2020, through December 31, 2020, the ERC is a refundable payroll tax credit created as part of the CARES Act. The purpose of the ERC was to encourage employers to keep their employees on payroll during the pandemic.

Qualified businesses can receive up to $26,000 per employee from the ERC program.  This is not a loan and does not have to be earmarked.  Essentially, it’s free cash you may be entitled to from the Federal government if you meet the requirements.

The CARES Act does prohibit self-employed individuals from claiming the ERC for their own wages. You also can’t claim wages for specific individuals who are related to you, but you can claim the credit for wages paid to employees.

What counts as qualified wages depends on the size of your business and how many employees you have on staff. There’s no size limit to be eligible for the ERC, but small and large companies are treated differently.

If you had more than 100 full-time employees in 2019, you can only claim the wages of employees you retained but were not working. If you have fewer than 100 employees, you can claim everyone, whether they were working or not.

For 2021, the threshold was raised to having 500 full-time employees in 2019, giving employers a lot more leeway as to who they can claim for the credit. Any wages that are subject to FICA taxes qualify, and you can include qualified health expenses when calculating the tax credit.

This income must have been paid between March 13, 2020, and September 30, 2021. However, recovery startup businesses have to claim the credit through the end of 2021.

How To Claim The Tax Credit

Even though the program ended in 2021, businesses still have time to claim the ERC. The ERC deadline for all four quarters for the 2021 tax year is April 15, 2025.

Since the tax laws around the ERC have changed, it can make determining eligibility confusing for many business owners. It’s also difficult to figure out which wages qualify and which don’t. The process gets even harder if you own multiple businesses. And if you fill out the IRS forms incorrectly, this can delay the entire process.

It can be helpful to consult with a tax professional. That person can help ensure that you’re on the right track. One company which has been able to do all the paper work for qualified businesses is BrightPoint Associates.  If you would like to explore the possiblities of your business getting the cash you may have missed out on CLICK HERE.