The Coronavirus Aid, Relief, and Economic Security Act (also known as the CARES Act) was signed into law on March 27, 2020. It included two programs to assist businesses with keeping workers employed: the Payroll Protection Program (PPP) administered by the Small Business Adminstration and Employee Retention Tax Credit (ERTC) administered by the Internal Revenue Service.
.
PPP funds are distributed based on 2.5 months of payroll and a minimum of 80% of the funds must be used on payroll to be eligible for forgiveness. Additionally, PPP funds are not taxable as revenue and you may still take deductions for the payroll covered by PPP.
.
ERTC tax credits, however, are credits (or refunds) for a percentage of payroll in each quarter that you qualify. There are specific rules for determining eligibility by quarter, and limiting the dollars that can be claimed for each employee.

The best option to receive your ERC refund faster is to work with an ERTC Refund submission provider. To do so, you’ll need to have the following documents: IRS 941’s for 2020, and 2021 (whichever is relevant) Signed IRS 941x’s for 2020, and 2021 and proof of submission to IRS.

Originally, employers were able to claim the Employee Retention Tax Credit (ERTC) whenever they file quarterly taxes to the government through Form 941. Thankfully, employers can still file for the ERTC in 2024!

The American Rescue Plan extended the ERTC to the end of 2021 (now ending September 30, 2021, with the passing of the Infrastructure Investment and Jobs Act). For 2021, eligible employers can get a credit equal to 70 percent of qualifying wages per quarter. The maximum credit per quarter is $7,000 per employee.

The ERC deadline for the first 3 quarters for the 2021 tax year is April 15, 2025. This gives you time to gather documentation for a robust application. But it’s still smart to apply as soon as possible, especially since the IRS is reporting a backlog in reviewing applications.

You are eligible for ERTC if your gross receipts have decreased by more than 20%. Suppose the drop is more than 90%. Even if you have more than 500 employees, you may qualify as a Severely Distressed Employee and be eligible for credit.

What Documentation Do You Need to Provide?

*Summary of quarterly revenue (Employer Quarterly Tax Return, Form 941)
*Payroll tax returns.
*Employee pay records (including paid by date)
*Location of your business and employees.
*Description of your business.
*Any detailed wage information used for a PPP loan and loan forgiveness.

No……but hope is not lost. There is a movement by politicians to include Q4 2021 but currently, wages paid after September 30, 2021, are no longer considered eligible wages for ERTC purposes.
.
As of right now, if you paid employee wages prior to September 30, 2021, we encourage you to apply now.

Your company may be eligible for up to $26,000 per employee.
.
If you are making an ERTC claim for the year 2020, you can receive 50% of the qualified wages of your full-time workers quarterly. Total wages considered are capped in 2020 at $10,000 per employee. Therefore, the highest credit you will receive per employee is $5,000.
.
For the year 2021, you can receive 70% of the qualified wages of your full-time workers quarterly for Quarter 1, Quarter 2, and Quarter 3. Total wages considered are capped in 2021 at $10,000 per employee per quarter.
.
The maximum possible credit you can receive for each employee is $7,000 per quarter, amounting to $21,000 per employee for the year’s first three quarters.

According to the ERTC, qualified wages are the wages, and compensation employers pay to their employees during the specified time frame. Therefore, to be eligible for an employee retention tax claim, your employees should have received qualified wages throughout the calendar year.
.
If your company provided employee health insurance, that is included with the qualified wages.

That depends on the IRS backlog, and at present, the minimum expected wait time to receive your ERTC credit disbursement from the IRS could be anything between 6-9 months.
.
Please note that due to the complexity of our processes and the critical nature to ensure absolute accuracy it will take approximately 3-6 weeks to complete your ERTC filing.

No. The Employee Retention Tax Credit (ERTC) is not a loan. Therefore, you do not have to pay it back.

Initially with the CARES Act, employers could choose to apply for PPP or claim ERTC credits, but not both.
.
PPP was more beneficial than ERTC for most businesses (for reasons we won’t go into here) and so most businesses with under 500 employees received forgivable PPP Loans.
.
On March 11, 2021, The American Rescue Plan Act of 2021 was signed into law and included many modifications and expansions to existing elements of previous stimulus programs.
.
Noteworthy modifications for business owners included:

Businesses who applied for and received PPP funds could now also claim ERTC credits.

ERTC credits could be retroactively claimed for businesses that qualified in 2020.

ERTC credits were extended through 9/30/21 with lower qualification requirements.

The per-employee cap on qualifying wages increased from $10,000 for all of 2020 to $10,000 per quarter for the first 3 quarters of 2021.

The refundable credit amount increased from 50% of qualifying wages in 2020 to 70% in 2021.
.
So the short answer is “Yes” . . . you can claim ERTC even if you received PPP funds.

Yes, you will be eligible. As of December 2020, the Consolidated Appropriations Act (CAA) made a provision that allows businesses that took out PPP loans to qualify. However, your number of qualified wages depends on your PPP loan forgiveness application.

If you provided your employee with $10,000 for the first quarter of 2021 in addition to $500 for health insurance. In that scenario, your ERTC will be 70% of the sum of the qualified wages and health insurance. Therefore, the total amount would be $7,350.

Unlike the Payroll Protection Program (administered by the Small Business Administration), there is actually no “application process” for the Employee Retention Tax Credits.
.
You simply claim the ERTC tax credit like you would any other tax credit – by asserting to the IRS that you can legally claim the credit.
.
When you claim a child tax credit, you do so by asserting this fact on your Form 1040 Personal Income Tax Return.
.
The difference is that when you claim an ERTC tax credit, you do so on your Form 941 Employer Quarterly Tax Filing.
.
For prior quarters, you must file an amended form (the Form 941-X) to reduce your current quarter’s tax contribution and request a refund of excess credits (which is highly likely).
.
Another perk of ERTC, is that since you can often estimate these credits in advance of distributing cash for payroll, you can file a Form 7200 to receive a cash advance to avoid waiting until the end of the quarter to apply for the refund.

Even though you may feel like revenue is back to normal, there are some items you want to consider before passing on this ERTC assessment.
.
First, even if revenues have returned to “normal” in 2021, you may have qualified in 2020 and you can retroactively claim those credits. That eligibility criteria in 2020 was based on revenue declines from 2019, or if your business was partially or fully closed due to governmental mandate.
.
Second, while your revenue may have returned to “normal” in Q1 2021, remember that we are comparing your Q1 2021 to Q1 2019. If 2019 was a year of growth for your business, then your revenue levels 2 years ago may have been much less than Q1 2020.
.
And lastly, if your revenues were down in Q4 2020 by just 20% compared to Q4 2019, then you may also be eligible for Q1 2021. There is a safe harbor provision that few advisors are talking about, and it means that many businesses are qualifying for $7,000 per employee in Q1 2021.
.
I know, it seems too good to be true, but the government wants to incentivize and reward you for keeping US residents employed and money flowing through our economy as we rebuild bigger and stronger than before.

Notably, with its passage of the American Rescue Plan of 2021, Congress extended the time by which the IRS could audit ERTC claims from three years to five. Unsurprisingly, despite the elongated time the IRS has been granted to perform audits of ERTC claims, such audits have already begun.

If an employer is audited and the amount of the ERTC is reduced, the penalties could range from a 20% accuracy-related penalty to a 75% penalty if the IRS asserts civil fraud by the employer. In an egregious case, the IRS could assert criminal fraud, resulting in penalties and potential imprisonment.

You are most likely referring to a provision of the CARES Act that allowed employers to defer the deposit and payment of the employer’s share of Social Security taxes. Those deferrals must then be repaid – with at least 50% of the balance due by 12/31/21 and the remaining balance due by 12/31/22.
.
ERTC credits are NOT a deferral. They are dollar-for-dollar credits against wages you’ve paid. Not taxes you’ve paid, but actual wages.
.
These credits can offset future tax contributions or you can receive a refund check – it’s your choice.
.
And you will NOT have to re-pay these funds (unless, of course, you don’t provide adequate documentation in the course of an audit).

Your banker, CPA, or Financial Advisor was probably very helpful when it came to getting your PPP funds because they were effectively signing you to an SBA-guaranteed loan. The SBA paid the bank administrative fees based on the PPP loans they made, and so they were incentivized to educate you about the program and get all your paperwork in order.
.
Compared to the ERTC, the PPP program was also a rather simple calculation. 2 ½ times your average monthly payroll including health insurance and state unemployment taxes.
.
From the conversations we’ve had with bankers, they have no interest in involving themselves in your employment tax compliance. For them it is a liability and beyond their scope of services.

Your Payroll Service does an excellent job of executing the fundamentals of paying your employees, paying your employment taxes and filing your quarterly reports.
.
But computing your ERTC credits requires visibility into your P&L and PPP forgiveness applications. Not only that, but the complex requirements around eligibility and allocating ERTC credits at the employee-level while accounting for annual and quarterly qualifying wage gaps and . . . well, you can probably tell why Payroll Services are not offering to do all of this for you.
.
The Payroll Services that we’ve worked with so far are happy to provide the payroll registers that we need to perform the allocations.
.
And they are happy to file the Amended Form 941-X with the IRS on our client’s behalf.
.
But that’s the extent of it.
.
In fact, most wise Payroll Services are asking clients to sign an indemnification waiver before submitting a Form 941-X because the Payroll Service can take no responsibility for the accuracy of the ERTC credits you are claiming.
.
For them to involve themselves in the intricacies of this calculation, it is a liability and beyond their scope of services.

Whether your tax accountant is a CPA or EA, he or she most likely only prepares your Federal and State Income Tax Returns.
.
However, ERTC credits are claimed against Employment Taxes on Form 941, and cash advanced through Form 7200.
.
The complexity of the ERTC program is a beast unto itself and every tax accountant we’ve talked to has said they focus on staying up-to-date on the ever-evolving income tax code, and they can’t now become experts in the ERTC program as well.
.
If your tax accountant is comfortable determining your eligibility by quarter and year, computing your credits, and preparing contemporaneous documentation to support an IRS audit, then you should certainly let them handle all of this.
.
If you want a second set of eyes on this, we’re happy to take a look.