ERTC Tax Credit Deadline 2023: Here's Everything You Need To Know

Get current on the ERTC Tax Credit Deadline 2023 and learn how to maximize your tax savings while taking advantage of this valuable incentive. Employee Retention Tax Credit (ERTC) is a solution the government offers to help eligible businesses face economic hardship due to COVID-19.

It is available for eligible employers that have seen a significant decline in gross receipts, and it allows for a tax credit of up to $5,000 for qualified salaries paid per employee. With the Employee Retention Credit deadline of 2023 fast approaching, it's essential to understand how you can take advantage of this valuable incentive and maximize your tax savings.

Employee Retention Tax Credit Eligibility Overview

Employee Retention Tax Credit eligibility is determined by a few critical criteria set by the Internal Revenue Service. This includes whether the employer's revenue has declined by more than 20% and the types of employee salaries. Employers must have experienced reduced gross receipts of at least 20% in any calendar quarter compared to the same quarter in 2019 or the same quarter in 2020.

Additionally, salaries paid to employees must not be excluded from qualified wages per the CARES Act, including qualified sick and family leave wages. Eligible employers can receive 50% of qualifying wages paid to eligible employees annually, with a maximum credit of $5,000 per employee. The maximum credit amount is based on the average number of employees during 2020; salaries paid to employees over $10,000 are excluded from the credit.

Application Process For Employee Retention Tax Credit?

Below are the steps that you have to follow in applying for Employee Retention Credit (ERC)

Step 1: Calculate Gross Receipts.

Employers must calculate their revenue to determine eligibility for the refundable tax credit. To do this, employers must compare their income of any calendar quarter in 2020 to the corresponding quarter in 2019 and calculate the difference.

Step 2: Determine Eligible Wages.

Employers must also determine which wages qualify for the ERTC, including qualified wages and excluded wages as defined by the CARES Act.

Step 3: Calculate the Credit Amount.

The credit amount an employer can claim is based on the number of eligible employees during 2020 and their total qualifying salaries paid in a given quarter.

Step 4: File Form 941.

Employers must file Form 941 for the applicable quarter to claim the credit. The form can be found on the IRS website and should be filed by the employer's due date.

Step 5: Claim Credit On Tax Return.

Once employers have completed the steps above, they can claim the credit on their tax return. The refundable credit can be used to reduce the employer's federal income taxes, and any remaining amount may be refunded to them.

Employee Retention Credit (ERC) Deadlines for Tax Years 2020 and 2021

While the Employee Retention Credit (ERC) has been a valuable aid for businesses impacted by the pandemic, it's critical to be aware of the respective deadlines for tax years 2020 and 2021 to optimize the benefits.

ERC Deadlines for Tax Year 2020

For the tax year 2020, the Employee Retention Credit could be claimed for wages paid after March 12, 2020, but before January 1, 2021. Businesses were required to calculate their eligibility based on a quarter-by-quarter basis. The deadline for claiming the ERC for tax year 2020 was the filing date of Form 941 for the fourth quarter of 2020, February 1, 2021. However, amendments to claim the credit for 2020 can still be made by submitting Form 941-X.

ERC Deadlines for Tax Year 2021

For the tax year 2021, the credit was extended under the Taxpayer Certainty and Disaster Tax Relief Act of 2020. Employers can claim the refundable tax credit for wages paid after December 31, 2020, but before January 1, 2022. The deadline to claim the ERC for tax year 2021 is the filing date of Form 941 for the fourth quarter of 2021, which is January 31, 2022. As with the 2020 tax year, employers can file a Form 941-X to amend a return and claim the credit if the original deadline has passed.

Remember, these deadlines are pivotal to claiming the benefits of the Employee Retention Credit. Always consult a tax professional to ensure you're fully optimized for tax savings and meeting all relevant deadlines.

How To Track Your Employee Retention Credit?

Employee Retention Credit (ERC) Eligibility is based on a broad set of criteria, including the employer's revenue and the salaries paid to employees. To qualify for the ERTC, employers must have undergone a decline in gross receipts of at least 20% in any calendar quarter compared to the same quarter in 2019 or 2020, and salaries paid to employees must not be excluded from qualified wages per the CARES Act.

Tracking Employee Retention Credit (ERC) eligibility can often be a complex task for employers, so they must use the right tools to ensure they comply with all requirements. Employers should consider using an online Employee Retention Credit (ERC) tracking tool to help them identify and track all their eligible employees, their total salaries, and the total credit available. These tools can also help employers stay up-to-date on any updates that may impact their eligibility.

Additionally, employers should consult with a tax professional for more advice and guidance on maximizing their Employee Retention Credit (ERC) savings. A tax professional can provide valuable insight on various topics, including calculating credit amounts and correctly filing the respective forms.

By understanding Employee Retention Credit Eligibility requirements and utilizing the correct tools to track their progress, employers can take advantage of this valuable incentive and maximize their tax savings before the ERTC tax credit deadline 2023.

Frequent-Asked Questions About Employee Retention Tax Credit:

To learn more about the refundable payroll tax credit, below are ten frequently asked questions:

What is the Employee Retention Tax Credit?

Answer: The ERTC is a refundable tax credit made available to qualified businesses whose gross receipts fell by 20% in the same quarter of 2019. Employers are entitled to a credit of up to $5,000 per employee on up to 50% of the qualifying salary paid to qualified employees throughout the fiscal year.

What are the criteria for Employee Retention Tax Credit Eligibility?

Answer: To be eligible for Employee Retention Credit (ERC), employers must have experienced a decline in gross receipts of at least 20%, and wages paid to employees must not be excluded from qualified wages per the CARES Act, including qualified sick and family leave wages. The maximum credit amount is based on the average number of employees during 2020; wages paid to employees over $10,000 are excluded from the credit.

How do I calculate my gross receipts for ERTC eligibility?

Answer: Employers must compare their revenue of any calendar quarter in the year 2020 to the same quarter in 2019 and calculate the difference. Employers should also review state and local credits available to them.

What are qualified wages for ERTC purposes?

Answer: Qualified wages include all wages paid (excluding those over $10,000) after March 12, 2020, to an employee who performs services during such period while their place of employment is fully or partially closed due to COVID-19 or whose services were reduced due to lack of business operations caused directly or indirectly by the pandemic. This includes certain healthcare costs associated with providing group health plan benefits that an employer pays or incurs after March 12, 2020, during this period, and before January 1, 2021.

How can I maximize my tax savings through ERTC?

Answer: Maximizing tax savings through the Employee Retention Tax Credit can be achieved through careful planning and accurate calculation of eligible wages. This includes a comprehensive review of all employees' wages to ensure that all qualifying wages are included in the credit calculation. Additionally, keeping abreast of any updates or changes to the ERTC legislation and consulting with a tax professional can also help employers to fully optimize their ERTC benefits and ensure maximum tax savings.

Is there a deadline for applying for Employee Retention Credit?

Answer: A critical deadline exists for applying for the Employee Retention Tax Credits (ERTC). The credit was initially available for wages paid after March 12, 2020, but before January 1, 2021. However, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended this deadline. Now, employers can claim the credit for wages paid after December 31, 2020, and before January 1, 2022.

The final deadline to claim the ERTC for tax year 2021 is the filing date of Form 941 for the fourth quarter of the year 2021, which is January 31, 2022. If employers miss this deadline, they can file Form 941-X to amend a return and claim the credit.

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.

What forms do I need when filing for Employee Retention Tax Credit?

Answer: Employers need Form 941, which can be found on the IRS website when filing for their applicable quarters claiming this credit.

Are additional credits available from state or local governments related to Employment Retention Tax Credits?

Answer: Yes, employers should also review state and local credits that may be available, which could help further reduce payroll taxes owed.

What is a recovery startup business?

Answer: An enterprise is a recovery startup if it begins operations after February 15, 2020. It is situated in a region where a disaster declaration was issued due to the COVID-19 pandemic by a federal, state, or local authority. Due to their inception amid the pandemic, these businesses may have yet to experience the requisite decline in gross receipts to qualify for the Employee Retention Credit through the traditional eligibility criteria. However, they can avail of the credit under specific provisions to aid their recovery and growth in these challenging times.

Do you want to learn more about claiming the Employee Retention Credit (ERC)? Head to ERTC Express website!