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Quick Guide to the Employee Retention Credit 2022

During the global pandemic, many businesses struggled financially due to restrictions which meant that their businesses were no longer able to function normally. For those that chose to pay their employees throughout this difficult period, despite lack of custom or productivity, it has come at an even higher price, as they struggled to get back on their feet.

The Consolidated Appropriations Act of 2021 extended a helping hand in the form of Employee Retention Credit.

What is Employee Retention Credit?

ERC is a credit that can be applied to small to medium businesses as relief for having paid out on wages throughout the pandemic if the business was in financial jeopardy due to government-imposed restrictions. It was developed by the Coronavirus Aid, Relief and Economic Security (CARES) Act and launched in March 2020.

How to Qualify for Employee Retention Credit

Unlike many other credits, ERC is easy to claim back with minimal criteria. In order to qualify businesses must:

  • Have suffered a financial detriment in the years 2020 and 2021 by at least 20% due to government-imposed restrictions on their workplace sector. This can be proven by using financial statements of previous years’ earnings.
  • Be a small to medium business (with 500 or fewer employees), that continued to employ pre-pandemic workforce levels throughout the period without the resulting profits Or;
  • Be a newly launched business during the pandemic with proof that the pandemic made it difficult for the company to make a profit within the first few years based on data driven forecasts.

For companies that took out the Paycheck Protection Plan (PPP) loan, you can still claim ERC on top of this. This wasn’t initially the case, but the CARES Act made changes to both schemes to allow for multi-claiming.

How Much Employee Retention Credit Will You Receive?

The amount you’ll receive as a business entirely depends on how many employees you had prior to and during the pandemic.

If you are a small business operating with under 100 employees and have maintained that headcount throughout the pandemic, then you may even qualify for 100% of their wages to be reimbursed to you for the first year.

For businesses of more than 100 employees but less than 500, you may be entitled to up to 50% of their wages reimbursed for the first year per employee. Due to increased restrictions, this amount was increased in 2021 for certain business areas, meaning that some businesses could qualify for up to 70% of each employee’s wage per quarter to be returned.

These amounts are capped at $26,000 per year or $10,000 per quarter, so as an employer, as long as your employees are below the $40,000 threshold, you could be entitled to 70% of all the wages that you’ve paid throughout the pandemic back.

When Does the Employee Retention Credit Scheme End?

The ERC scheme ended back in December 2021, so no further wages will be eligible if they were paid after this time. However, if you haven’t claimed yet, you can still claim retrospectively to receive the money you lost previously.

You will be able to claim right up until December 31st, 2024, to receive the refund. From your claim date, it could take 6-10 months to receive your credit.

How to Spend Your Employee Retention Credit Money

Although you’ve already paid out the wages that are being reimbursed, you must still use the money to benefit your business and make up for any profits lost. This money never needs to be paid back, as it is to make up for your losses, but you must still spend it wisely. This is money that needs to be put back into the business and not used for personal spending.

Can someone carry out the filing?

Filing for ERC funding is not a straightforward process, and, in many ways, you are recommended to use a specialist service to carry out the filing. Companies such as ERC benefits provide fast, efficient and reliable service to carry out the process so that you can focus on your own business and let the specialist company do all the legwork to get your funding in place.

If you’d like more information on ERC or how to apply, call ERC Benefits at 561 680 4677 or visit ercbenefit.com today.

The Global Guru