Employee retention credit (ERC) is a tax credit that was introduced by the United States government as a part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020. It was designed to provide financial assistance to businesses that have been severely impacted by the COVID-19 pandemic. The credit is still available in 2023, and it is important for businesses to understand how it works and how they can benefit from it. We will also answer the frequently asked question – Can I apply for ERC in 2023?
What is the Employee Retention Credit (ERC)?
The Employee Retention Credit is a refundable tax credit that is available to eligible employers who have been financially impacted by the COVID-19 pandemic. The credit is equal to 70% of qualified wages paid to employees, up to a maximum of $10,000 per employee per quarter. This means that businesses can receive a maximum credit of $28,000 per employee for 2023.
Who is eligible for the Employee Retention Credit?
There are two categories of businesses that are eligible for the Employee Retention Credit. The first category is businesses that have experienced a significant decline in gross receipts. The second category is businesses that were fully or partially suspended by government order due to the COVID-19 pandemic.
Businesses that have experienced a significant decline in gross receipts are eligible for the credit in 2023 if their gross receipts in a calendar quarter are less than 80% of the gross receipts for the same quarter in 2019. For businesses that were not in operation during the first quarter of 2019, the comparison is made with the same quarter in 2022.
What are qualified wages?
Qualified wages are wages paid by an eligible employer to employees during the period of eligibility. In 2023, qualified wages include both cash compensation and certain qualified health plan expenses.
How to claim the Employee Retention Credit?
Businesses can claim the Employee Retention Credit on their federal employment tax returns, such as Form 941, Employer’s Quarterly Federal Tax Return. They can also request an advance payment of the credit by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.
What are the benefits of the Employee Retention Credit?
The Employee Retention Credit provides financial assistance to businesses that have been severely impacted by the COVID-19 pandemic. The credit can help businesses to retain their employees and avoid layoffs. It can also help businesses to cover their operating expenses and maintain their operations during the pandemic.
How to maximize the benefits of the Employee Retention Credit?
To maximize the benefits of the Employee Retention Credit, businesses should carefully track their gross receipts and qualified wages. They should also consult with their tax advisors to determine their eligibility and to claim the credit properly. In addition, businesses should consider other financial assistance programs that may be available to them, such as the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program.
ERC FAQs
Everything you need to know about Employee Retention Credit – ERC FAQs.
Can businesses still apply for ERC in 2023?
As of 2023, businesses can still apply for the Employee Retention Credit (ERC) if they meet the eligibility criteria. The credit is available until December 31, 2026, unless it is extended or modified by the government. However, businesses should note that the eligibility criteria and rules for claiming the credit may change over time. Therefore, it is important to stay updated on the latest guidance and consult with a tax advisor to ensure that the credit is claimed properly.
Can businesses claim the Employee Retention Credit (ERC) and the Paycheck Protection Program (PPP) at the same time?
Yes, businesses can claim both the Employee Retention Credit (ERC) and the Paycheck Protection Program (PPP), but they cannot use the same wages to qualify for both programs.
Can self-employed individuals claim the Employee Retention Credit?
No, self-employed individuals are not eligible for the Employee Retention Credit.
Read more or watch a video about Can I qualify for the ERC if I’m self-employed?
How long will the Employee Retention Credit be available?
The Employee Retention Credit is currently available until December 31, 2026, unless it is extended or modified by the government.
Conclusion
The Employee Retention Credit is a valuable financial assistance program that is still available in 2023. Eligible businesses can receive a maximum credit of $28,000 per employee for the year. By understanding the eligibility criteria, qualified wages, and claiming process, businesses can maximize the benefits of the credit and overcome the financial challenges posed by the COVID-19 pandemic.