The Employee Retention Tax Credit Can Be Filed In 2022 For 2021 & 2020

Precis: Yes! Whatever the title says, it’s true! Exciting and relieving, right? Well, then let’s comprehend more knowledge about it in this blog. 

Government laws may be complicated and scary, significantly when rules and deadlines are continually changing. This is what is occurring with the Employee Retention Tax Credit (ERTC). The ERTC retroactive period’s intended date of January 1, 2022, has been pushed back to October 1, 2021. There are also qualification changes.

Despite the benefits to your firm, the National Federation of Independent Business (NFIB) determined that just 4% of small business owners are aware of the ERTC program. In 2020, just 8% of owners utilized ERC benefits, and 10% in 2021.

What does this change signify for your company? Can you claim employee retention credit (ERC) for salary received through December 31, 2021?

If you wish to claim ERC or have questions about this tax benefit, continue reading. We will answer any of your questions regarding applying for ERTC in 2022.

What Exactly Is An Employee Retention Tax Credit?

The ERTC was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act, which got into effect in March 2020, assists businesses in keeping people on the payroll.

The Consolidated Appropriations Act 2021 (CAA) and the American Rescue Plan Act are two more measures influencing the act (ARPA). Both bills modify and prolong credit and advance payments until 2021.

Further, small and medium-sized firms are eligible for up to 50% of qualified salaries earned from March 13 to December 31, 2020, under the ERTC. This covers employers that have received a loan via the Paycheck Protection Program (PPP). The maximum compensation per employee is $10,000.

The CAA increases the tax credit for employee earnings received through the end of 2021 to 70%, which includes certain health insurance expenditures. This credit is limited to $10,000 in pay per employee every quarter during the first two quarters of 2021.

You Might Still Be Eligible

Although the employee retention tax credits expired on October 1, 2021, you may still take advantage of them if your company qualifies.

If you did not apply for the credit earlier, you might apply for a retroactive ERTC reimbursement. To file retroactively, use Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. The time limit is three years from the date of your initial submission.

IRS Notice 2021-49

The IRS’s Notice 2021-49 offers ERC advice for companies earning qualifying salaries between June 30, 2021, and January 1, 2022. The warning applies to ERC for 2020 and 2021.

The ARPA made the following changes to the ERC for the third and fourth quarters of 2021:

Employers who pay qualifying salaries between June 30, 2021, and January 1, 2022, will be eligible for credit.

Adding “recovery starting firms” to the list of qualified employers.

The qualifying salaries for “severely financially troubled employers” have been changed.

Payroll salaries received in conjunction with 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act are exempt from the ERC. Furthermore, it does not apply to ARPA 5003 restaurant revitalization awards.

The notification answers the query that the Treasury Department and IRA have been receiving about 2020 and 2021 ERC credits, such as:

How to handle tips as qualifying wages and interactions with the 45B credit. 

  • Defines full-time equivalents and full-time employees. 
  • Wages are paid to the majority of spouses and owners.
  • Denial of qualifying pay deductions at different times.

The notification informs the taxpayer whether a modification using an adjusted employment tax return is required.

The IRS may pay in advance to the employer if a reduction in employment tax deposits does not cover the credit. To get an advance payment, complete Form 7200, Advance Payment of Employer Credits Due to Covid-19.

All clarifications in IRS Notice 2021-49 are applicable during the ERTC period. If you uncover that your earnings were incorrectly classified as qualifying for ERTC, you must make Form 941 revisions.

How To Claim An ERTC In 2022

If your mind is racing to figure out whether your company qualifies for the employee retention tax credit in 2022, or if you have questions about submitting retroactive or revised taxes, call ERCSpecialists now.

They can answer your queries and assist you with the ERC tax service, tax advice, the CARES Act, and filing alternatives. Don’t put off—contact them to ensure you obtain all of the credits your company is eligible for.