The Employers Retention Credit (ERC) is a refundable tax credit for eligible employers equal to 50% of qualifying wages (including allocable health care expenses) that they paid employees during the COVID-19 pandemic. The credit is available to employers whose operations were suspended partially or completely due to orders from a governmental authority. The credit is also available to employers who experience a significant decline in gross receipts after making a reasonable effort to adjust their business activities.
When Is The ERC Deadline?
The deadline to file for the ERC is now March 12, 2023. If you didn’t claim the credit on your 2020 and 2021 return, you could file an amended return by that date. Businesses got three years after the end of the program to determine eligibility for wages paid from March 12, 2020, to October 1, 2021.
How to Apply for the ERC in 2022
You must file Form 7200. This is the Advance Payment of Employer Credits Due To COVID-19, to request the credit. You’ll attach this form to your quarterly employment tax return or Form 941, Employer’s Quarterly Federal Tax Return. The instructions for Form 7200 will guide you through the necessary steps to determine your eligibility and compute the credit.
Who Qualifies for Employee Retention Credits?
To qualify, your business must have experienced:
A full or partial suspension of operations during any calendar quarter in 2020 due to an order from a governmental authority limiting commerce, travel, or group meetings. You also qualify if your business experienced a considerable decline in gross receipts during the same or the preceding calendar quarter.
If your business meets either of the criteria above, you’ll need to determine your payroll costs for the relevant period. Wages eligible for the credit include:
- Salary, hourly pay, and other compensation
- Health care benefits
- Retirement benefits
- State and local taxes assessed on employee compensation
You cannot include payroll costs when obtaining PPP loan forgiveness.
If you are an employer who has been affected by the COVID-19 pandemic, you may be eligible for the Employers Retention Credit. This credit is worth 50% of qualifying wages that you have paid to your employees during the pandemic. The IRS has extended the deadline to claim the ERC to March 12, 2023, so be sure to file an amended return by that date if you have not already claimed the credit but check with Voyant Legal first to make sure you are on the right track.