The new tool that is available to you can assist in determining whether or not you are eligible for the Employee Retention Credit.
The pandemic caused by the coronavirus (COVID-19) has posed a variety of difficulties for business owners and employers who are attempting to maintain profitable operations and continue paying their employees. Some people are beginning to see glimmers of optimism as some limitations imposed during the government shutdown are gradually being lifted around the United States so that employers may start getting back to work.
Credit for Keeping Good Employees (ERC)
At the height of the COVID-19 epidemic, the federal government took action by passing new law that offers financial aid to employers as well as employees. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, and it contains a provision that provides a refundable tax credit against certain employment taxes equal to 50 percent of the qualified wages (with a maximum of $10,000 per eligible employee) that an eligible employer pays to employees after March 12, 2020 and before January 1, 2021. This credit can be used to offset the amount of employment taxes that the employer is required to pay. This is known as the Credit for the Retention of Employees (ERC).
Unfortunately, not every employer qualifies for benefits under the ERC. If an employer, for instance, is granted a loan via the Paycheck Protection Program (PPP), which is also a component of the CARES Act, then that employer is ineligible for the Employer Responsibility Contribution (ERC). In order to determine for ERC benefits, an employer must determine whether or whether their company had a whole or partial closure, as well as a significant decrease in total revenue. In addition, an employer is responsible for determining which wages are eligible for the credit. Employers with more than 100 full-time employees have more restrictions on the types of wages that are eligible for the ERC compared to those with 100 or less workers. And last but not least, instructions on how to claim credit for the work.
New ERC tool
Thomson Reuters has created a cost-free, user-friendly ERC tool that guides employers through the ERC qualifying process step by step. This tool is intended to assist employers in navigating the ERC qualification process. It starts out with an overview page that provides a brief synopsis of the ERC. The next step is a series of questions that are designed to assist an employer in deciding whether or not it is eligible for the ERC and how to make a claim for the credit. There are vital links provided to the frequently asked questions (FAQs) section of the IRS website that can aid an employer in determining whether or not their company had a complete or partial halt in business activities or a significant drop in gross sales. After an employer has gone through the procedures and answered the questions, the tool will produce a report for the employer to go over as well as a link to free materials that are provided by Checkpoint Edge COVID-19. Users are permitted to utilize the tool as frequently as they see fit in order to work through the qualifying requirements.
Calls to broaden the scope of the ERC
There have also been calls for an increase in the ERC’s membership. The HEROES Act, which contains measures that would increase the relevant percentage of eligible wages from 50 percent to 80 percent, was enacted by the U.S. House of Representatives on May 15, 2020. In May of 2020, the JOBS Credit Act was also presented for consideration in the House. In addition to other things, it has a provision that is analogous to the one that would raise the proportion from fifty percent to eighty percent.
If any of these amendments are passed into law, it is possible that a greater number of businesses will be eligible for the ERC. It is also possible that further information would need to be considered regarding the process through which an employer might qualify for the credit.
You should give some thought to subscribing to Checkpoint payroll news in order to be abreast of any modifications that may be implemented in the future. In the meanwhile, we kindly ask that you make use of the free ERC tool and access to the resources provided by Checkpoint Edge COVID-19.
The Employee Retention Credit (ERC) for 2021 Q4 was repealed by the Infrastructure Bill for the majority of employers.
As of the day when the Infrastructure Investment and Jobs Act was signed into law on November 15, 2021, the Employee Retention Credit (ERC) will no longer be available to the majority of employers during the entirety of the fourth quarter of 2021. “Recovery startup businesses” are businesses that began operations after February 15, 2020, and for which average annual gross receipts did not exceed $1 million for the three-taxable-year period immediately preceding the calendar quarter for which the credit is determined. These businesses can continue to claim ERCs for the fourth quarter (with a limit of $50,000 for the entire quarter).
What are CohnReznick’s thoughts on the matter?
Employers had been widely aware, during the entirety of the fourth quarter, that the ERC may be repealed for the quarter as a result of the bill’s passing through the Senate in early August. This was due to the fact that the measure was passed. As a consequence of this, many employers who were otherwise qualified for the ERC decided against lowering their federal employment tax deposits and/or filing Forms 7200 to claim advances on their expected ERC amounts for wages and health plan expenses paid during the month of October and the first few weeks of November.
Employers who took the more proactive posture and continued to anticipate fourth quarter ERCs would need to engage with their payroll providers to resolve any related federal employment tax problems. It seems likely that the IRS will publish some sort of advice in the near future on what occurs to an employer that has taken an advance against their Q4 ERC. We anticipate that the employer will be compelled to refund the ERC amount collected without incurring any penalties or interest, but we will need to wait and watch to be certain of this.
However, we are also keeping our fingers crossed that Congress would acknowledge the retroactive effect that this reform will have now that we are nearly halfway through the fourth quarter. If this is the case, it is possible that they will change the date on which the law goes into effect in order to permit credits for wages that were paid before the law was enacted.
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