What is Employee Retention Credit?
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Last modified 3/19/2021 9:10:10 AM EST |
Added by ExpressEfile Team
Employer Retention Credit is a refundable tax credit. Eligible employers can get quick access to this credit by decreasing employment tax deposits. Employers who find it hard to run their business due to the impact of COVID-19 can use this amount to retain their employees on payroll. This refundable amount can be claimed against certain employment taxes equal to first 50 percent of the qualified wages paid to the employees between March 12, 2020, and January 1, 2021.
If the employer’s employment tax deposit doesn’t meet the requirement to cover the credit, employers can file Form 7200 with the IRS to request the advance payment. For every individual employee, 50% of the wages can be considered as credit, up to $10,000.
Employers and tax-exempt organizations are eligible to claim a refund on the retention credit if they run a business or trade during the year 2020 and experience either:
- The semi- or full suspension of their business or trade during any calendar quarter year because of government orders limiting travel, commerce, or group meetings.
- A significant decline in gross receipts.
A significant decline in gross receipts begins:
- On the initial day of the calendar quarter year of 2020
- For which an employer’s gross receipts are less than 50% of its gross receipts
- For the same calendar quarter year in 2019.
The gross receipts end:
- On the start day of the first calendar quarter year following the calendar year of quarter
- Are more than 80% of its gross receipts
- For the same calendar year quarter in 2019.
The credit is applicable to qualified wages paid during this period or any calendar quarter in which operations were suspended.
Note: The timeline to claim the employee retention credits is extended till August 2, 2021.