Short answer is all!
Restaurants, Car Washes, Hair/Nail Salons, Convenience Stores, Liquor Stores, Retail Stores, Jewelry Shops, Manufacturing, Raw Material Suppliers and Distributors, Food Distributors, Professional Firms, Service Providers, Non-Profit Organizations, and the list goes on.
The CARES Act's Employee Retention Credit is a fully refundable tax credit. For the 2020 Program, ERC is equal to 50% of qualified wages (including allocable qualified health plan expenses) that eligible employers pay their employees. This applies to wages paid after 03/12/2020 and before 01/01/2021. The maximum amount of wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an employee is $5,000.
For the 2021 Program, the credit is increased to 70%, and the limit is $10,000 per quarter. This applies to wages paid for only the first three quarters of 2021. This means the annual maximum for an employee is $21,000.
The tax credit offsets all withheld federal employment taxes including federal income tax withholding, Employer FICA and Medicare. Any excess credit will be refunded or advanced by the IRS.
Eligible Employers for the purposes of the Employee Retention Credit are those that carry on a trade or business during calendar years 2020/2021, including a tax-exempt organization, that either:
The operation of a trade or business maybe partially suspended if an appropriate governmental authority imposed restrictions upon the business operations by limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes). This can be a "Stay at Home Order" for non-essential businesses, a capacity restriction, or other possibilities.
Qualified wages are compensation provided to employees during an eligible period. An eligible period is either:
Like most economic development business tax incentive programs, the Employee Retention Credit (ERC) has certain complexities that may impact receiving an accurate, optimized, and audit-ready number. It is important to fully document processes and procedures, organize your records, and avoid any risk areas in advance of a potential IRS audit of the claim, which may come years later.
The ERC has numerous issues such as Controlled Group criteria, documenting qualification methodology, coordination with PPP loans, allocating healthcare expenses to the appropriate time periods, etc. Your payroll company does not have all this information, and your CPA may not have the specific expertise to ask.
The use of ERC specialists can help prevent disaster and/or leaving money "on the table".
Perhaps the most complicated aspect of the ERC Program, separate businesses under common ownership that meet IRS Controlled Group criteria must be evaluated together for eligibility. If the tests are passes, all entities are eligible; if not, none are eligible. The ERC is then calculated and filed for each separately.
This program is not an "income tax credit" and not related to your annual business tax returns or your profit/loss from the business. Although it is called a tax credit, it is most frequently received as a cash payment from the IRS.
The Employee Retention Credit (ERC) is accessed by filing a 941-X Amended Quarterly Payroll Tax Return. The IRS will accept these for up to three years after the initial filing, so the ability to participate in ERC program may continue into the end of 2024.
However, acting quickly is key because the ERC rules are subject to change by the IRS. For example, the IRS removed ERC eligibility for fourth quarter of 2021 costing businesses an additional $7,000/employee! File now to lock-in today's ERCs.
Your pre-qualification, initial analysis to determine your eligibility, calculate approximate credit, file amended return, and provide audit protection and representation is completely free. If you file for an ERC with us, our fee is a percentage of the credit to be received.