For businesses that missed the CARES Act tax credit deadline, it’s not too late

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What do you want to know

  • The rules for claiming the employee retention tax credit were expanded in 2021, so some small businesses can still file amended payroll tax returns to do so.
  • Small business owners have up to three years from the original filing deadline to apply for the credit retroactively.
  • The IRS has also provided retroactive penalty relief to taxpayers who owe additional income tax.

Many small business customers have already taken advantage of the CARES Act relief provisions for 2020 and 2021. Others, however, may still be eligible for assistance if they have not taken full advantage of the relief provisions at recent years.

Generally, companies were eligible for the refundable tax credit for employee retention (CIFE) if their business activities were suspended in 2020 or 2021, if they suffered a certain level of loss of income or if they qualified as as a start-up after February 15, 2020. .

The ERTC complaint rules have been significantly expanded in 2021, meaning some small business customers may not have taken advantage of the relief. It is still possible for these clients to file amended social security tax returns. It is therefore essential to fully understand the rules to ensure that customers receive the full amount they deserve.

Extended ERTC 2021

The employee retention tax credit is no longer available for salaries paid after the third quarter of 2021. Still, some small business owners may not have realized they qualify for the 2021 credit, and they have up to three years from their original filing deadline to retroactively apply for the credit.

Generally, employers were eligible to claim ERTC if their business operations were suspended in 2020 or 2021. They were also eligible in 2020 if they suffered a 50% drop in revenue compared to the same quarter in 2020. For 2021, however, companies may be eligible if their turnover has only decreased by 20% compared to the same quarter in 2019.

Under the original law, employers were not eligible for ERTC if they also received a Paycheck Protection Program (PPP) loan. This rule was later removed, so that businesses that received PPP loans could also take advantage of the ERTC (however, if the PPP loan proceeds used to pay salaries were forfeited, those salaries were not eligible for ERTC). the ERTC).

The amount of the credit was also significantly increased in 2021. Originally, the credit was capped at 50% up to $10,000 of wages (so $5,000 per employee). In 2021, the amount was increased so that employers can claim up to $7,000 per employee per quarter (up to $21,000 total in 2021).

Many employers have also been confused about the rules for working employees. Originally, employers with 100 or more employees were prohibited from claiming the credit in respect of wages paid to active employees (i.e., only wages paid to employees who were not working or worked reduced hours counted).


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