Is your business eligible for Employee Retention Tax Credit?

The Employee Retention Tax Credit (ERTC) is a vital lifeline for businesses, and one which is worth applying for regardless of your company’s current circumstances.

So what is it exactly, and what’s the application deadline by which you’ll need to have submitted your claim?

The basics

The recent pandemic forced major government action to avoid disaster for small and medium-sized businesses in particular, with the ERTC being introduced as part of a package of public spending so that organizations would be compelled to retain team members rather than laying them off at the height of the COVID crisis.

Is your business eligible for Employee Retention Tax Credit?

The full eligibility details of the employee retention credit scheme are explained in detail here, but the gist is that to qualify, your business must have been hampered by the pandemic to a significant degree.

This includes having your operations limited or shut down entirely in 2020 and 2021, with eligibility covering things like being incapable of carrying out in-person meetings, or traveling for commercial purposes.

How soon must you file an ERTC claim?

While the periods covered by the ERTC scheme are set in stone, the good news is that you still have time to retroactively file for tax relief, with two main deadlines to keep in mind.

First, for filings that apply to relief being claimed in 2020, you’ve got until April 15 of 2024. Second, for claims relating to 2021, the deadline sits at April 15 of 2025.

It’s better to get this done sooner rather than later, because the last thing you want is to apply at the last moment, only to find that there are issues with your filing that you are then unable to rectify.

How much tax can be refunded?

The generosity of this particular initiative is sizable, although the amount you can claim will vary depending on a number of factors, such as the number of people you employ and the types of roles they fulfill.

Speaking generally, you can expect to receive a tax credit that equates to as much as 50 percent of any wages that were paid out in the allowable period of 2020.

The cap per employee is $26,000, and the further good news is that even if you participated in the Paycheck Protection Program, you’re still able to make a claim under the ERTC scheme as well.

What’s the typical wait time for an ERTC application to be approved and pay out?

As with any major government project, the wheels of the ERTC approval process turn comparatively slowly. You could be waiting for anywhere between six and 10 months to receive the refund once you’ve successfully filed for relief.

So if you’re hoping for a quick injection of cash to get your company out of immediate financial dire straits, this isn’t the answer. But if you’re eager to build towards long term stability and you can afford to wait for this tax credit to be applied, it is more than worth your time to make a filing.

Do I have to handle this process on my own?

While you can file an ERTC application under your own steam, there are plenty of services out there which have been set up to do just that.

In fact if you are worried about missing the deadlines for filing, it’s better to outsource this, especially if your in-house finance team is already overstretched.

Wrapping up

There’s every reason to harness the ERTC program if you run a small or medium sized business, as it will catalyze your recovery from the fallout of the pandemic.


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