Employee Retention Credit Deadline Miller CPA 3% Fees
While the ERC is no longer available for tax years 2022 and beyond, the opportunity for retroactive application still stands. In retrospect, businesses could have accessed substantial credits, with potential benefits of up to $5,000 per employee in 2020 and a remarkable $7,000 per employee for up to 3 quarters in 2021. Therefore, staying informed about the deadlines is imperative to ensure you take advantage of this chance to reduce your tax liability significantly.
Each tax year has a specific deadline, allowing businesses to focus on one application at a time, given the distinct eligibility requirements.
ERC Deadline for the 2020 Tax Year
For the 2020 tax year, the Employee Retention Credit deadline is set for April 15, 2024. This deadline encompasses all three eligible quarters: Q2, Q3, and Q4.
ERC Deadline for the 2021 Tax Year
In the case of the 2021 tax year, the ERC deadline for Q1, Q2, and Q3 is April 15, 2025. This deadline provides businesses ample time to compile the necessary documentation for a comprehensive application. However, submitting your application as soon as possible is advisable, especially considering the reported backlog in IRS application reviews. The sooner you apply, the higher the likelihood of prompt approval and the receipt of your credit funds or their application toward an outstanding tax liability.
Overview of ERC Eligibility
Before venturing into the application process for the Employee Retention Credit, it is essential to ensure that your business qualifies for either the 2020, 2021, or both tax years. Eligibility criteria vary depending on the tax year in question.
For the 2020 Tax Year
- The business employed in 2019 at most 100 full time equivalent employees.
- Government mandates either suspended operations in terms of hours or service capacity OR revenue was less than 50% of 2019 gross receipts.
For the 2021 Tax Year
- The business employed in 2019 at most 500 full time equivalent employees.
- Government mandates either suspended operations in terms of hours or service capacity OR revenue was less than 80% of 2019 gross receipts.
In addition to these criteria, newer businesses may qualify for the ERC as recovery startup businesses.
To be eligible for this category, your business must meet the following requirements:
- Commenced operations after February 15, 2020.
- Maintains annual gross receipts under $1 million.
- Employs one or more W-2 employees.
How to Retroactively Apply for the ERTC
To retroactively apply for the Employee Retention Tax Credit (ERTC), employers can turn to IRS Notice 2021-20 for essential guidance. It’s important to note that this notice primarily focuses on qualified wages paid between March 12, 2020, and September 30, 2021, and essentially reiterates the ERTC Frequently Asked Questions (FAQs) previously available on the IRS website.
Contained within this notice is crucial advice for employers who received a Paycheck Protection Program (PPP) loan and now wish to claim the employee retention tax credit retroactively. To initiate the claim process for past quarters, employers must file Form 941-X, also known as the Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, for the specific quarter(s) in which the qualified wages were disbursed. The IRS thoughtfully includes three illustrative examples (Q&A No. 57) to clarify the application process.
Additionally, IRS Notice 2021-20 encompasses seven scenarios (Q&A No. 49) illustrating how employers with PPP loans can discern which wages, if any, qualify for this tax credit. The eligibility of wages is intricately tied to how these qualified payments were documented in the PPP loan forgiveness application.
It is of utmost importance to underscore that the IRS leaves no room for ambiguity regarding expenses eligible for PPP forgiveness. Any costs not included in the initial loan forgiveness application cannot be retroactively factored in. Therefore, meticulous attention must be paid to include all eligible expenses, encompassing non-payroll costs like utilities, rent, and operational expenditures, among others, in the PPP loan forgiveness applications. This thorough approach is essential for maximizing the pool of qualified wages that can be utilized for the ERTC.
Conclusion
The Employee Retention Credit has served as a vital lifeline for businesses grappling with the economic uncertainties stemming from the COVID-19 pandemic. As we move beyond 2021, understanding the ERC deadlines and eligibility criteria remains essential for businesses seeking to claim this valuable credit retroactively. While the ERC may no longer be available for tax years 2023 and beyond, the opportunity for retroactive application represents a potential financial windfall. By staying well-informed and taking prompt action, businesses can navigate this credit landscape effectively and secure the financial relief they need to thrive in a post-pandemic era.
The window of opportunity for claiming the Employee Retention Credit (ERC) is gradually closing. If your business or nonprofit organization qualifies, a brief but critical period remains for you to assess your eligibility and submit your claim. However, this time is slipping away, so swift action is imperative.
The ERC eligibility spanned from March 13, 2020, to September 30, 2021 (or July 1, 2021, to December 31, 2021, for recovery startup businesses). Eligible entities, whether businesses or nonprofit organizations, can still seek the refunds rightfully owed to them by initiating the process through amended payroll tax returns using Form 941-X.
It’s crucial to remember that amended tax returns aiming to claim a refund must be filed within a specific timeframe. Generally, this involves submitting the amended return within three years from the date the original return was filed or within two years from the date you paid the tax, depending on which date is later. As the ERC deadline approaches, take advantage of this opportunity for financial relief. Act now to secure the benefits you deserve.
Solutions by Mike Miller, CPA 