Important Updates to the Employee Retention Tax Credit (ERTC)
You may have seen in the news recently that the Employee Retention Tax Credit is on Congress’s chopping block. This important tax credit is especially useful for small businesses, and due to COVID-19, Congress expanded the employee retention credit (read about this expansion here). The expansion was intended to go through the end of 2021; now, it looks like it may end early. So what does that mean?
Why is Congress considering a cut?
A new infrastructure bill is working its way through the House and Senate, and because there are upwards of $200 billion in untapped Covid relief funds, Congress is considering moving things around. If reallocated, the funds set aside for the employee retention credit would be shifted to go towards the new infrastructure bill. The problem is not that Congress does not see a need for these relief funds, it’s that people are not using them.
If Congress does cut the credit, does it go away completely?
No. If Congress cuts the credit, it will only reduce the amount each business can receive. With the expansion, business owners could receive as much as $28,000 in tax credit; without it, this amount would be reduced to $21,000.
It’s a small difference in the grand scheme of things, but this change would likely hit small businesses harder than big ones. That’s why it’s important to claim the credit now.
My business is doing well, why do I need this credit?
Whether your business is doing well or not, I strongly encourage you to take advantage of any tax credit you are eligible for, especially in the times of COVID-19. A July 2021 Government Accountability Office report showed that, as of May, less than 146,500 employers had claimed employee retention credits, but there are many businesses that are eligible for the credit but don’t realize it.
How do I claim the credit?
In order to fund qualified wages, you can “access” this credit by either claiming them on upcoming payroll forms for periods that haven’t been filed yet OR you can claim credits for prior periods. So there is still time to claim credits for prior periods back to March 2020 until present – so do miss this opportunity!
Knowing which credits you’re eligible for and how to claim them is an important part to growing your business. At SDA, every services package includes unlimited advice, from accounting and bookkeeping to payroll and taxes. Call us today to learn how we can help you grow your business!
-Stanley & Kelly
