As we get closer to the ERC deadline of 2023, it's time to get your ducks in a row. The ERC, or Employee Retention Credit, is a critical tax relief measure that businesses must be aware of. The deadline in 2023 signifies the last opportunity to claim any qualified wages paid amid the pandemic-related business disruption. It's not just another date to mark on your calendar but a pivotal financial moment your business can't afford to overlook.

The ERC deadline 2023 marks the end of a tax relief journey that has helped eligible businesses stay alive during difficult times. As this crucial date approaches, it's essential to have a clear understanding of eligibility requirements, how to calculate the credit, and the precise documentation needed. The road to ERC isn't a maze but a ladder to financial sustenance provided you know the proper climbing steps.

Who Is Eligible For Employee Retention Credit?

Eligibility for the Employee Retention Credit (ERC) extends to a broad range of entities that faced specific challenges during the pandemic.

1. Businesses of all sizes: Whether you're a large corporation or a small startup, if your business were either fully or partially suspended because of governmental order related to COVID-19, you may be eligible for the ERC.
2. Tax-exempt organizations: Non-profit entities that faced similar disruptions can also apply for the credit.
3. New businesses: Businesses that started operations after February 15, 2020, are eligible, provided they meet the necessary criteria.
4. Companies that experienced significant gross receipt declines: Businesses that saw a 50% decrease in gross receipts in a quarter of 2020 compared to the same calendar quarter in 2019 are qualified for the ERC.

Remember, eligibility criteria can vary depending on the specifics of your business and the period in question. Always consult with a tax professional for tailored advice.

Who is Ineligible to claim the ERC?

Certain entities are excluded from claiming the Employee Retention Credit. Here's a list of who may not be eligible for the payroll tax credit:

1. Government entities: Federal, state, and local governments, along with any agencies or instrumentalities of these governments, are not eligible for the ERC.
2. Companies without wage expenses: Businesses that do not have wages or compensation expenses during the eligible quarters cannot claim the ERC.
3. Self-employed individuals: Sole proprietors or independent contractors with no employees other than themselves do not qualify for the ERC.
4. Businesses without pandemic-related disruptions: If your company did not experience any disruptions due to COVID-19 governmental orders or a significant decrease in gross receipts, you may be ineligible to claim the credit.

Remember, this list is not exhaustive, and each business situation is unique. It's essential to seek advice from a tax professional to accurately determine your company's ERC eligibility.

Determining a Decline in Gross Receipts for ERC Eligibility

To be qualified for the refundable tax credit, a business must have experienced a substantial decline in gross receipts during a particular quarter. But how does a company establish this decline? Here's a step-by-step guide to help you navigate this process.

Step 1: Gather Financial Records

Begin by collecting your company's financial records for the relevant quarters. This will typically include bank statements, sales receipts, and accounting reports. These documents will clearly show your revenue during the specified period.

Step 2: Calculate Gross Receipts

Once you have your financial documents, calculate your gross receipts. Gross receipts for a business are generally the total amount the company received during its accounting period, without subtracting any costs or expenses. This might include sales revenue, interest, dividends, rents, royalties, fees, or commissions.

Step 3: Compare Quarters

After calculating your gross receipts, compare the figures for the corresponding quarter in 2019 and 2020. For instance, if you're examining Q2 of 2020, compare it to Q2 of 2019. A significant decline in gross receipts means more than a 50% decrease.

Step 4: Document Your Findings

Finally, document your findings in a clear, organized manner. This documentation will be crucial when applying for the Employee Retention Credit and may also be needed for future audits or reviews.

Please remember while this guide provides a general overview, each business's situation is unique. Seek the help of a tax specialist for advice customized to your situation. These steps are intended to be a starting point and should not replace professional advice.

What Is ERC For Recovery Startup Business?

A Recovery Startup Business commenced operations after February 15, 2020. This is under Section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act during the pandemic.

The Employee Retention Credit (ERC) provides substantial assistance to such businesses. As a new entity, these businesses likely encountered significant obstacles during their initial stages due to the pandemic's disruption. The ERC offers a lifeline by allowing these businesses to receive a tax credit for employee wages. This financial relief can help stabilize their operations, retain employees, and ultimately accelerate their recovery and growth.

Remember, the benefits and eligibility requirements can vary, so it's highly recommended that Recovery Startup Businesses seek advice from a tax professional or ERC specialist to understand and maximize their potential ERC benefits fully.

Claiming The Employee Retention Tax Credit

Step 1: Determine Eligibility

Before anything else, ascertain your eligibility for the ERC by reviewing the criteria mentioned in this guide. Remember the specific conditions related to business size, operational disruptions, gross receipt declines, and the like.

Step 2: Review Wages and Health Plan Costs

Review your wages and health plan costs for the applicable periods. The ERC covers a portion of salaries and qualifying health plan costs paid to employees during the eligible quarters.

Step 3: Calculate the Credit

Calculate the credit amount. The ERC is a percentage of your employees' qualifying wages and health plan costs. This percentage varies depending on the year and quarter.

Step 4: File the Necessary Forms

File the required tax forms with the Internal Revenue Service (IRS). For most employers, this will involve filing Form 941, Employer's Quarterly Federal Tax Return, and attaching Form 7200, Advance of Employer Credits Due To COVID-19, if you wish to request an advance of the credit.

Step 5: Maintain Documentation

Ensure you maintain all necessary documentation that proves your eligibility and supports the figures provided in your claim. This includes financial records, payroll data, and details of any disruptions to your operations due to COVID-19.

Step 6: Consult a Tax Professional

Finally, consider consulting a tax professional to help eligible employers navigate the process. The ERC has specific rules and requirements; a tax professional can guide your situation.

Always remember the information in this guide is intended as a general overview. It should not be used as a substitute for professional tax advice, guidance from the IRS, or a qualified tax professional.

Employee Retention Credit Deadline Of Application

Knowing the deadline for applying for the Employee Retention Credit is crucial to ensure your business gets all the benefits of this valuable relief measure. The deadline to claim the ERC is generally the same as when filing your company's quarterly federal tax return.

For instance, if you're claiming the ERC for the second quarter of 2021, you need to apply by the deadline of the corresponding quarterly tax return. Please note deadlines can vary and may be subject to changes by the IRS, so it's advisable to periodically check the IRS website or consult with your tax professional to stay updated.

Keeping track of this deadline and preparing your application in advance will help your business benefit from the ERC and ease some of the financial challenges imposed by the COVID-19 pandemic.

For the 2020 tax year, the Employee Retention Credit deadline is April 15, 2024.

For the 2021 tax year, the ERC deadline for quarters one through three is April 15, 2025.

Head to the ERTC Express website and learn how it can help you claim your Employee Retention Credit!