7 Important FAQs: The Employee Retention Act

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So you’re a business owner, and you’ve got some questions about the Employee Retention Act (ERA). What business owner doesn’t? Companies are as large as airlines and as small as one individual have needed impact relief funds.

The COVID-19 pandemic has led to the creation and development of a wealth of new federal legislation to support businesses like yours. The CARES Act Employee Retention Tax Credit is a mouthful to say, but it’s not as difficult to understand as you might think. It could also save your business, especially your employees! 

With new variants of COVID-19 emerging annually, there are ways to see if your business is eligible for support. In this post, we’ll review some of the most pressing Employee Retention Act FAQ. 

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Employee Retention Act FAQ

The IRS has compiled a wealth of details related to the ERA, so we’ve filtered through and found those most valuable to you. We’re experts in this field, but we want you to feel secure in your understanding like we are.

1. Can Any Size Business Apply for Employee Retention Credit?

The short answer to this question is “Yes.” Regardless of the size of your business, you can apply for employee retention credit. Whether you run a “trade” or “business” entity, both are seen as the same type of business by the IRS. 

The government wants you to be able to keep your employees on the payroll throughout this crisis. If your business has suffered a 50% or more reduction in gross receipts, you can qualify for credit on wages and health care costs.

2. What is the CARES Act?

The CARES Act is the Coronavirus Aid Relief and Economic Security Act. This $2.2 trillion stimulus bill was passed by President Donald Trump in March of 2020 in order to mitigate the impending impact on businesses under the pandemic. 

This fully refundable payroll tax credit applies to many qualified wages that businesses paid to full-time staff between March 13, 2020, and December 31, 2020. The purpose of this act was to ensure businesses could keep their staff on the payroll. 

One of the biggest issues for businesses under COVID-19 was mass layoffs. The CARES Act can be claimed immediately so you can keep your employees working, even if your business is being hit hard this decade.

3. Are Employers in all U.S. Territories Eligible?

Employers across all U.S. territories are eligible for credit for payments related to qualified wages. So long as you’re subject to Federal Insurance Contribution Act (FICA) under your wages structure, you’re eligible.

4. What Would Make My Business Ineligible?

The only types of businesses that are not eligible to claim the CARES Act and employee retention credit are federal, state, and local government entities. Self-employed individuals are also ineligible for support, but there are nuance requirements that may allow you to claim.

Tribal governments may be eligible. As you navigate through the application process, you’ll learn quickly what you’re eligible for, and how we can assist you. 

If you’re still unsure of whether or not you and your business qualify, start gathering your documents. Applying to determine if you qualify is the only way to know for sure. Even if you’re not eligible under the ERC and CARES Act, you might be eligible for another program.

5. Are Household Employers Eligible for the ERC?

As household employers are not considered to be operating a trade or business, they do not qualify. However, if you are a household employer and you operate a trade or business, you may be able to qualify.

6. I’m a Tax-Exempt Employer. Do I Qualify?

Even if you don’t pay taxes, you can qualify for relief. As the purpose of the ERC is to keep people employed, your business’ tax commitment does not exempt you from claiming. If your business was negatively impacted financially by the COVID-19 pandemic, you are almost certainly eligible for support.

7. How Can My Business Claim the Employee Retention Credit?

Submitting an application for the employee retention credit requires you to gather as much evidence as possible to determine how your business was impacted by COVID-19. Some businesses were stopped from operating altogether during the pandemic. 

If you were allowed to remain in operation but your incoming revenue took a big hit, find as much information on your losses as possible. You’ll also need to compare your losses to a normal year of operation. The IRS and government need this information from your business operations in 2019.

The IRS has extended the ERC support through to 2024. As there is so much uncertainty about the long and short-term impacts of the pandemic, you can support your employees into the future with security by applying today.

Need To Know More?

The CARES Act employee retention tax credit does not just support your business. Though it’s imperative to have employees to help your business flourish, the money is designed to support your employees directly. 

Your employees need to keep their homes, feed their families. You can go the extra mile for them by applying for employee retention credit. The payment comes as a cash payment from the IRS.

You can use this cash for your payroll tax payments. Health care support should also be considered. You can claim immediately if you need to, and we’ll help you navigate the process with ease.

Why ERC Today?

If you didn’t find your answer in our Employee Retention Act FAQ, you can visit our blog to read more. We know how desperately your business needs support in keeping your operation flowing through this crisis. 

You’re not alone. Thousands of businesses have applied and gotten all the help they need. ERC Today is here to help with whatever questions, queries, concerns you may have about the employee retention credit.

With quick and easy consulting and support on applications, you can get everything you need from our dedicated team of experts. Contact us to find out more.

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More Great Information For Employers:

When President Biden signed the Infrastructure Investment and Jobs Act into law, the Employee Retention Credit sunset date was moved from 12/31/2021 date to 9/30/2021 (for businesses other than ARPA Recovery Startup Businesses). 

HOWEVER, this does not mean the ERC was eliminated! Eligible businesses can still apply for stimulus funds based on financials between 3/13/2020-9/30/2021.