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Claiming Employee Retention Tax Credit

May 13, 2022
Many of you have heard of the Employee Retention Tax Credit (ERTC) and want to know if the program is still active and, if yes, what can be done to avail your business of this significant COVID-inspired relief program. Following is a summary of the terms of the program and what credits might be available.
 
  1. Two Tests of Eligibility
    1. Reduced gross receipts test:
      1. 2020: You are eligible if your gross receipts declined in any calendar quarter by more than 50% compared to the same quarter in 2019.
      2. 2021: You are eligible if your gross receipts declined in any calendar quarter by more than 20% compared to the same quarter in 2019.
    2. Government Order Test
      1. An employer is eligible if it experiences a calendar quarter in which the operation of the trade or business is fully or partially suspended during the calendar quarter from an appropriate government authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19.
      2. Determination under the government order test will likely require the services of a company that specializes in researching the various mandates and regulations that occurred at all levels of government in the industry you operate and the geographic region of your company.
  2. Eligibility Periods
    1. 2020: March 13, 2020 – December 31, 2020
    2. 2021: January 1, 2021 – September 30, 2021
  3. Eligible Wages
    1. The sum of the wages and health insurance payments were made on the behalf of eligible employees.
    2. Cannot use the same wages used to achieve PPP loan forgiveness and as eligible wages for the ERTC. There are strategies for maximizing the credit in this situation.
  4. Maximum Credit
    1. 2020: 50% of up to $10,000 per quarter of wages per employee = $5,000 credit per quarter per eligible employee
    2. 2021: 70% of up to $10,000 per quarter of wages per employee = $7,000 credit per quarter per eligible employee
The CATA urges its dealers to consult with their established professional tax and legal advisors regarding ERTC eligibility. You may also contact Phil Kent, CPA, Partner, at MichaelSilver at 847-982-0333 or www.michaelsilver.com with questions.
 

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