Small business owners may have heard of the Employee Retention Credit (ERC). This tax credit was introduced by the CARES Act to help companies keep their payrolls steady during difficult times. In this guide, we will explore what ERC is and how LoanBud can assist you in claiming it without any hassle.
What is the Employee Retention Credit?
The Employee Retention Credit (ERC) was initially introduced under the CARES Act to encourage businesses to maintain their payrolls during the pandemic. Eligible business owners can claim a tax credit against qualified wages paid to employees in 2020 and 2021, with a maximum credit of up to $5,000 per employee for 2020 and up to $21,000 for 2021. However, businesses must meet specific eligibility requirements for this valuable credit. Our team at LoanBud can help small business owners navigate the complex application process and maximize their eligible credits while ensuring compliance with all regulations.
Overview of ERC
The Employee Retention Credit (ERC) is a tax credit encouraging businesses to maintain their payrolls during the COVID-19 pandemic. The American Rescue Plan has extended the employee retention tax credit through 2021, providing companies with up to $21,000 per employee in tax credits for that year, for a total tax relief of up to $26,000 per employee. To qualify for the credit, a business must have experienced significant revenue declines or government shutdowns due to COVID-19. Small business owners can claim this credit against qualified wages paid and are eligible for assistance from LoanBud in calculating and filing their credits with the IRS.
How Businesses Can Claim ERC
To claim ERC, small business owners need to follow a step-by-step process. First, they must determine their eligibility for the credit and gather all necessary documentation, such as 941s, payroll reports, P&Ls, and information about any PPP loans. Then, once eligible, they can submit their claim with the internal revenue service before important filing deadlines – April 15 of either 2024 or 2025, depending on the year in which earnings were made.
Claiming Employee Retention Tax Credit (ERTC)is a complex process that requires attention to detail and expertise in tax calculations. Working with LoanBud can make this easier for small business owners by providing audit protection and ensuring the maximum possible credit based on qualifying wages.
Eligibility requirements for ERC
Which small businesses qualify for the employee retention credit?
To be eligible for ERC, a business must meet one of the following criteria:
- The company was fully or partially suspended due to government orders related to COVID-19
- The business experienced a significant decline in gross receipts (more than 50%) compared to the same quarter in 2019
ERC Frequently Asked Questions
Are there any restrictions on how funds received from ERC can be used?
No, there are no restrictions on how funds received from ERC can be used. Small business owners can use these funds to pay any business-related expenses, such as salaries, rent, utilities, employment taxes, health insurance, and other operational costs. However, there are no specific requirements for business owners’ use of ERC funds.
What is the deadline for claiming ERC for 2020 and 2021?
The deadline for claiming ERC for 2020 is April 15, 2024, while the deadline for claiming ERC for 2021 is April 15, 2025. Therefore, small business owners should submit their claims before the deadline to avoid missing this tax credit.
Can a small business still qualify for PPP loans if they receive an Employee Retention Credit?
Yes, a small business can still qualify for PPP loans if they receive an Employee Retention Credit. However, companies cannot use the same wages paid with forgiven PPP loan proceeds as qualified wages when claiming ERC.
What Businesses are Eligible for the Employee Retention Credit (ERC)?
If your business faced partial closures as a result of government mandates limiting commerce, travel, or group gatherings, or if you’ve experienced substantial drops in quarterly gross revenue (compared to the same quarter in 2019) due to the pandemic, you may be an eligible employer for the Employee Retention Credit (ERC) program.
What is the maximum employee retention credit an employer can receive?
The maximum employee retention credit an employer can receive depends on the year the credit is claimed. For 2020, the full credit is $5,000 per employee, while for 2021, it is $21,000. The Employee Retention Credit (ERC) was introduced as a part of the CARES Act to encourage companies to maintain their payrolls during the COVID-19 pandemic. This credit gives businesses a tax credit against qualified wages paid to employees during the qualifying period. If you are a small business owner who wants to claim the ERC, LoanBud can help you with the complex calculations and documentation required for the application process. We work with third-party CPA firms to verify the accuracy and validity of calculations and provide audit protection. We aim to help you get the maximum possible credit you are eligible for.
How long does the employee retention credit last?
Eligible businesses can claim the employee retention credit for qualified wages paid to employees from March 13, 2020, to December 31, 2021. The ERC provides a tax credit of up to $5,000 per employee for 2020 and up to $21,000 per employee for 2021. It is important to note that the ERC is not a loan and does not have to be repaid. Small business owners have until April 15, 2024, to file for 2020 credits and until April 15, 2025, to file for 2021 credits. As a small business owner, it is essential to take advantage of the ERC if you are eligible and seek professional assistance to ensure you receive the maximum possible credit. At LoanBud, we are dedicated to helping small businesses obtain the credit they are entitled to and provide audit protection and third-party CPA-verified calculations and amendments to ensure accuracy and validity.
Is there a limit on the amount of wages eligible for the employee retention credit?
Yes, there is a limit on the amount of wages that can be used to calculate the Employee Retention Credit (ERC). For 2020, the limit is $10,000 per employee, meaning the maximum credit per employee is $5,000. For 2021, the limit is $10,000 per quarter, which means that the total credit per employee is $7,000 per quarter, for a total of $28,000 per employee for the year. However, it’s important to note that the credit is calculated based on qualified wages paid to employees during the designated periods, and not all wages may be eligible. Additionally, there are other criteria that businesses must meet to qualify for the ERC. If you need assistance determining your eligibility and calculating your credit, LoanBud can help. Our team of third-party tax professionals can guide you through the process and ensure you get the maximum credit you’re entitled to.
What types of wages qualify for the employee retention credit?
As a small business owner, you may wonder what types of wages qualify for the employee retention credit (ERC). The ERC is a tax credit that businesses can claim against qualified wages paid to employees during 2020 and 2021. Here’s what you need to know about qualifying wages for the ERC.
First, it’s essential to understand that not all wages qualify. The ERC was designed to encourage companies to maintain their payrolls during the COVID-19 pandemic, so it only applies to wages paid to employees who were retained during periods of economic hardship.
For 2020, qualified wages include those paid between March 13, 2020, and December 31, 2020. For 2021, qualified wages include those paid between January 1, 2021, and December 31, 2021. However, the rules for qualified wages differ between these two periods.
For 2020, qualified wages are those paid to employees during periods when the business was wholly or partially suspended due to a government order related to COVID-19 or when the company experienced a significant decline in gross receipts. The qualified wage amount is limited to $10,000 per employee for the entire year, and the credit is equal to 50% of eligible wages.
For 2021, qualified wages are those paid to employees when the business experienced a significant decline in gross receipts (at least 20% compared to the same quarter in 2019).
Filing Deadlines for ERC
The Employee Retention Credit (ERC) is a tax credit that businesses can claim against qualified wages paid to employees during 2020 and 2021. To receive the maximum possible credit, small business owners must file their credits by April 15 of either 2024 or 2025, depending on the year they are filing for. LoanBud can help you obtain this credit by handling complex calculations and working with customers to ensure accuracy while providing audit protection.
How LoanBud Can Help Small Business Owners Claim ERC
LoanBud can help small business owners claim ERC by providing calculations and amendments that 3rd party CPA firms verify. We also offer audit protection to ensure the accuracy and validity of the application. In addition, our team handles complex calculations and works with customers to get the maximum possible credit they are eligible for.
LoanBud collects all necessary documentation, including 941s, payroll reports, P&Ls, information about PPP loans (if applicable), government shutdowns that impacted their business, and supply disruptions using a template we provide. The fee for our services is only paid if the company receives the credit – ranging from 15% – 20%.
Services provided by LoanBud
LoanBud provides comprehensive services to help small business owners obtain the employee retention credit (ERC) they are entitled to. We begin with an ERC eligibility assessment and expert guidance on the application process. Our team also assists with calculation and documentation gathering, including reviewing 941s, payroll reports, P&Ls, and information about PPP loans if applicable. In addition, we partner with third-party CPA firms to handle complex calculations and amendments while providing audit protection for our clients.
Documentation required for ERC application
Proof of payroll expenses, quarterly tax filings, and proof of business operations during the pandemic are some of the crucial documents required for ERC applications.
The following is a list of documents that LoanBud requires from their clients to help them obtain the maximum possible credit:
- Quarterly Form 941s
- Payroll reports
- P&Ls
- Information on payroll taxes paid
- Proof of government shutdowns that impacted their business
- Supply disruption information (template provided)
- Information about PPP loans (if applicable)
LoanBud’s service includes handling complex calculations and working with customers to ensure they receive accurate and valid amendments. Ensuring you have all the necessary documentation can speed up your application process and increase your chances of obtaining this vital credit for retaining employees during these unprecedented times.
Fee structure for LoanBud’s services
LoanBud charges a flat fee of 15% – 20% of the amount of the credit your business receives. There are no upfront costs, so we only get paid once you do. In addition, our payment structure is contingent upon successful claim approval, meaning that if we can’t help you obtain the credit, there’s no fee. At LoanBud, we aim to ensure every small business owner gets access to the funds they need through ERC and provides peace of mind throughout the process.
Final Thoughts
The Employee Retention Credit is a valuable tool for small business owners to maintain their payroll and keep their businesses afloat during these uncertain times. However, claiming the ERC credit can take time and effort. With LoanBud, small business owners can rest easy knowing that they have a team of experts working on their behalf to ensure they receive the maximum possible credit they are eligible for.
If you are a small business owner struggling to maintain your payroll or facing supply disruptions due to the pandemic, consider applying for the Employee Retention Credit. With LoanBud’s help, you can easily navigate the application process and receive the credit you are entitled to. Contact LoanBud today to learn more about how we can help your business thrive.
