As of 2021, the Employee Retention Credit is allowing employers a total of 70% credit. This is an increase from the previous year and allows up to $10,000 of an employee’s qualified wage per quarter.
Along with that increase, the ERC has many other benefits that small businesses need to take advantage of before it ends.
Today we are going to help you through the ERC application process for your small business. We’ve put together a simple 5 step process to apply. Let’s get started so you can take advantage today!
Step 1: Gather Your Basic Business Information
The employee retention credit is available to all businesses in the United States, however not every business may qualify. That means you need to work with your accountant or CPA to determine whether or not your business can take advantage of this employee benefit.
This starts with gathering all of your business information. This includes information such as:
- Business legal name
- Legal address & information
- Number of employees
Think about anything that pertains to the business, you’ll need to show that in the application process.
If you are a business owner, it is important to know about ERC documents. ERC stands for “Employer Retention Certificate.” This document is required by the government in order to prove that you have hired a specific number of employees. There are a set of documents you need to file in order to obtain an ERC certificate. In this blog post, we will go over each document and explain what it is used for. Stay tuned!
1. ERC Application: The ERC application is the first document you need to fill out in order to start the ERC process. This document includes information about your business, such as its name, address, and EIN number. It also has questions pertaining to the ERC program, so it’s important to answer the questions accurately.
2. ERC Eligibility Information: This document provides information about your company’s eligibility for ERC. It includes information about the number of employees you need to hire, your company’s financials, and other criteria that may affect your ERC eligibility.
3. ERC Attestation Form: This form is used to attest that you have met all the ERC eligibility criteria. It must be signed by an authorized ERC representative and submitted with all the other ERC documentation.
4. ERC Employer Certification Letter: This document is used to certify that you are an ERC employer. It must be signed by all ERC employers and submitted along with the ERC application.
5. ERC Employee Participation Agreement: This document must be signed by all ERC employees and submitted along with the ERC application. It confirms that ERC employees agree to participate in the ERC program and accept the requirements associated with it, such as salary caps, health insurance requirements, etc.
6. ERC Tax Form: This document is used to report ERC wages and taxes on ERC employees. It must be submitted along with all ERC documents.
7. ERC Payment Authorization Form: This document is used to authorize ERC payments to ERC employers. It must be signed by an ERC representative and submitted along with all ERC documents.
8. ERC Employer Agreement Form: This document is used to confirm ERC employment status. It must be signed by ERC employers and submitted along with ERC documents.
9. ERC Employee Information Form: This document is used to confirm ERC employee information, such as name and address. It must be signed by ERC employees and submitted along with all ERC documents.
10. ERC Certification Form: This document is used to certify ERC compliance. It must be signed by ERC employers and ERC representatives and submitted along with all ERC documents.
By understanding the ERC documents and filing them correctly, you can ensure that your business is ERC compliant.
What Types of Employers Are Eligible for the Employee Retention Credit?
If you want to be eligible for the ERC, you will have needed to carry on your trade or business as of the years 2020 and 2021. This includes:
- Totally or partly suspended operations by a government, or
- Experienced a decline in your gross receipts during the calendar year compared to 2019
If this applies to your small business, then you are most likely eligible need to apply for the deadline.
The size of your business will also matter. If you want to be eligible for claiming the ERC, your business will need to have 100 or fewer employees. If you have over 100 workers for your business, you are not be qualifying for the ERC.
Step 2: Gather Your Payroll Information
Once you’ve gathered your information, the next step is to gather any employee payroll information. This includes:
Employees that will qualify for the employee retention credit employee wages
The employee’s gross pay for each quarter of 2020 and 2021 (this should be known if you already have an employee)
If an employee has left the business, make sure to find out when they stopped working for your small business.
What Payroll Service Do You Use?
It is important that you have your employee payroll information from a payroll service, however, they will most likely not have all of the information you need. You cannot use a spreadsheet or calculator to complete this part of the application process.
The ERC contains several problems such as the documenting of qualification methodology, coordination with the PPP loans, Concretolled group criteria, as well as healthcare expenses.
Unless your payroll services provide all of this information for you, it is highly recommended that you work with an ERC specialist to prevent any issues in your application and so that you can get the most out of the credit.
How Many W-2s Were Issued in 2020?
Next, you will need to know how many W-2s were issued in 2020 and 2021. This is the employee retention credit employee wages. The employee retention credit employee wages are paid before taxes or another deduction was made from that amount.
If your business does not pay employees with a W-2, then this employee benefit may not be for you since it requires payroll information. You can contact us for more information regarding this!
Step 3: Gather Any PPP Loan Documents & Information Step
Now we need to gather any documentation on PPP loans. This includes:
- The date the PPP loan was issued
- The amount of the PPP loan
Using any documentation on your PPP loans, you can start to determine how much you can receive in ERCs.
If you have not had a PPP loan, then this part does not apply to you and you can go ahead to step 4.
Step 4: Gather Your Full-Time Employee Info From 2019
You will need to gather the full-time employees that were employed for 2019. You’ll need to have both their contact information and full-time employment information from 2019. This includes:
- Name & address of job location
- Start date & end date of employment with your small business
What is a Full-Time Employee? The number of hours an individual needs to work per week must be at least 30 hours for this credit to apply. For example, if someone works 20 hours per week, they are not eligible for the ERC because they do not meet the minimum requirement.
Paying Qualified Wages
As long as your business is subject to the Federal Insurance Contribution Act under your employee’s wage structure, you are eligible. make sure to have proof of this.
Step 5: Collect Your Sales Revenue Information From 2019-2020
Lastly, for the employee retention credit, you will need to gather any sales revenue from 2019-2020. The amount of the retention credit calculation is determined by your net income or your loss as well as how many full-time employees you have. If you do not have a business with 100 or fewer workers, then this part does not apply to you.
In Just 5 Easy Steps You Can Get Your ERC in 5 Days or Less!
The employee retention credit has been providing small businesses with thousands of dollars and it can do the same for yours! It’s as easy as 5 simple steps and can be completed within 5 days or less.
If you need more information on the ERC or if you need an ERC specialist to help you with the application process, contact us today. Our team is on standby to provide your small business with the help it deserves!