Employee Retention Tax Credits (ERTCs)

These are a tax incentive the government provides to encourage businesses to retain employees during challenging economic times. These credits were introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in response to the COVID-19 pandemic. The purpose of ERTCs is to provide financial relief to businesses adversely affected by the pandemic and help them maintain their workforce. The credits are designed to offset a portion of the employer's payroll taxes and can be claimed against the employer's share of Social Security taxes. Initially, under the CARES Act, businesses with 100 or fewer full-time employees were eligible for the credits. However, this was expanded under subsequent legislation, such as the Consolidated Appropriations Act and the American Rescue Plan Act, to include businesses with up to 500 employees. The amount of ERTCs a business can claim depends on several factors, including the number of employees retained and their wages. Under the CARES Act, eligible employers could claim a credit equal to 50% of qualified wages paid to each employee, up to a maximum of $10,000 per employee for all quarters combined. However, this was increased to 70% of qualified wages for 2021 and extended through December 31, 2021. Qualified wages include actual wages paid and certain health plan expenses. The definition of qualified wages varies depending on the size of the business and whether it experienced a significant decline in gross receipts due to the pandemic. It's important for businesses interested in claiming ERTCs to carefully review the eligibility requirements and consult with a tax professional or refer to official IRS guidance. The credits can provide significant financial relief and help businesses retain their valuable workforce during challenging times.