Can you still claim the employee retention tax credit?


Of all the businesses financially impacted by the COVID-19 pandemic over the past two years, construction service contractors (BSCs) certainly fall into the category. While no government program is likely to fully compensate for lost profits from facility closures and overall loss of business, there is a program in place that can help provide some relief.

As Go Banking Rates reported, small businesses can still claim the Employee Retention Tax Credit – or simply the Employee Retention Credit (ERC) – despite the program’s original deadline being extended to October 2, 2021. The program, which was established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), incentivizes small businesses to keep their employees on the payroll.

How it works

In the early stages of the ERC established earlier in the pandemic, the tax credit business could receive 50% of $10,000 in earned wages for each employee deemed eligible on a pandemic-affected payroll. In 2021, however, that figure jumped to 70%. Payments were made on a quarterly basis for each eligible employee. As an example of Go Banking Rates, this means that $10,000 in salary for an employee in 2021 could earn $7,000 in credit per quarter, potentially totaling $28,000 per year for each employee. In cases where the total tax credit exceeds the employer’s share of payroll taxes due for a quarter, the employee would be refunded the excess according to the Treasury.

How to get the ERC

In order to be eligible for the ERC, an employee must complete a quarterly assessment statement form (Form 941) to monetize the credit for each pay period. So, for example, a company that pays $100,000 cumulatively for payroll will likely receive a credit return of $70,000. While the aforementioned deadline to receive the ERC was last October, businesses can apply retroactively by completing a Refund Claim Form, also known as the Employer’s Adjusted Quarterly Federal Income Tax Return (941-X ). From there, the deadline would be after three years of the initial tax return, as eligibility is based on 2019 records. Specific parameters to be eligible include:

  • A company must have had 500 employees or less in 2019
  • Gross revenue in 2020 or 2021 must be at least 20% lower per quarter than the same quarter originally listed from 2019

Additionally, businesses with 100 or fewer full-time employees may qualify for a 100% wage credit. Companies that have not received a closure order can still benefit from this advantage.

In related news, check out this recent CleanLink article on employee retention tips.

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