Tag: ERTC Loan

When is the ERTC Program Ending?

In March 2020, several firms were obliged to halt activities that were not required to preserve or defend life. This is where ERTC emerged. How do you qualify and when is the ERTC program ending?  You are qualified for this credit if you had to significantly modify the way you did business when the pandemic struck. To comply with this order, you had to have entirely or partially suspended operations due to COVID-19. Closing indoor dining rooms and serving takeaway is an example of a partial suspension of business. Closing all areas of your firm temporarily under governmental order is an example of completely halting operations.  DO YOU THINK YOU QUALIFY FOR THE ERTC PROGRAM? BOOK A MEETING WITH ONE OF OUR EXPERTS TODAY AND FIND OUT! You can also call us at 909.466.7876 and learn more about what TPG does to make your business grow. Key Takeaways  ERTC expired at the end of 2021 but qualifying firms still have time to claim credit if they haven’t already  On taxes filed in 2022, business owners can still claim ERTC for qualifying employees. This applies for all of 2020 and a portion of 2021  Employers with 100 or fewer full-time employees are eligible for the credit on all employee pay. This is true whether the firm is open for operation or subject to a closure order  How Does ERTC Work?  The Employee Retention Tax Credit was a refundable payroll tax credit for “qualified earnings”. The credit was provided to aid in worker retention between March 2020 and December 2020. The initial ERC was altered many times. It was eventually retrospectively suspended as of September 2021. The one exception is for starting recovery enterprises outlined by the Infrastructure Investment and Jobs Act.   The ERC for 2020 is 50% of all eligible earnings given to workers between March 12, 2020, and December 31, 2020. For all quarters, salaries are limited to $10,000 per employee. As a result, you might claim a maximum credit of $5,000 per employee.  For 2021, the credit is 70% of all eligible salaries paid to workers from January 1, 2021, to September 30, 2021. It is capped at $10,000 in compensation per employee every quarter. As a result, you may claim $7,000 for each employee each quarter. The maximum credit per employee is $21,000.  If your company is classified as a recovery startup, your total credit is restricted to $50,000 each calendar quarter. The credit is available for wages received through December 31, 2021.  When Is The ERTC Program Ending?  So, when is the ERTC program ending? Although the ERTC expired at the end of 2021, qualifying firms still have time to claim the credit if they haven’t already. Eligible firms can still claim the ERTC for the employment taxes that apply to them, and eligible salaries provided to their employees until December 31, 2021.  Even though the program was due to expire at the end of 2021, businesses can claim the credit on revised payroll tax returns as long as the statute of limitations, which is three years from the filing date, remains open. On taxes filed in 2022, business owners can still claim the ERTC for qualifying employees for all of 2020 and a portion of 2021.   Other resources, in addition to the ERTC, are still available. For example, paid-leave tax benefits have been extended and are now accessible until the end of September. While PPP monies have been depleted, numerous Small Business Administration Programs, such as the Shuttered Venue Operators Grant program and Economic Injury Disaster Loans, may be appropriate for qualifying enterprises.  The Restaurant Revitalization Fund is currently overcrowded, but legislation has been submitted to add $60 billion to the program. Some states, including New York, are developing state-based grant programs to assist small companies.   Employers could claim the ERTC retroactively for the periods while it was in force if they did not do so earlier. The IIJA retroactively terminated the ERTC on October 1, 2021, except for recovery starting firms, which were given until December 31, 2021. You can, however, modify your quarterly employment tax return using Form 941-X for any period in which you qualified but did not claim the ERTC.  Is My Company Eligible?  There is no size restriction for ERTC eligibility. Although, small and large firms are handled differently. Employers with 100 or fewer full-time employees are eligible for the credit on all employee pay, whether the firm is open for operation or subject to a closure order.   Qualified wages are earnings paid to employees when they cannot provide services due to COVID-19-related situations. This applies to companies with more than 100 full-time employees. Private-sector business that had to undergo complete or partial halt of operations due to a government order limiting trade due to COVID-19 in 2020 or 2021 are eligible employers.   To qualify for the gross revenue test, a firm must have seen a more than 50% decrease in 2020 compared to the same quarterly period in 2019. A company’s gross receipts must have decreased by more than 20% in 2021 compared to the same quarter in 2019. New firms not in operation during a quarter in 2019 may replace the corresponding quarter in 2020 for the comparison. If your company had a significant drop in gross receipts but has subsequently recovered and you did not claim the credit, you can do so now.  Conclusion  ERTC was designed to encourage firms to keep their employees on payroll for the duration of the lockdown. This was at a time when businesses were not operational, and no one was going into work. The initial ERTC was altered many times for this reason. Nonetheless, if you qualify for the ERTC, it might provide immediate monetary assistance and huge credit amounts for your business. But it’s important to know when the ERTC program is ending. To obtain the ERTC, you should determine whether the company’s personnel fit the ERTC standards as soon as possible. Navigate to the MyTPG.com ERTC page or click one […]

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What is ERTC?

So, what is ERTC? The Employee Retention Tax Credit was established as part of the CARES Act to encourage businesses to keep paying employees. This could be accomplished by granting an employer credit for salaries given to qualifying employees. The ERTC is not the same as the PPP, despite also being part of the CARES Act. It is an additional credit that businesses may be overlooking without recognizing it. The Employee Retention Tax Credit is a refundable tax credit with a broad base that encourages firms to keep staff on their payroll. It is frequently missed since the CARES Act did not enable enterprises that obtained PPP loans to claim the ERTC when it was initially established. Because it was more advantageous, almost all firms chose the PPP. What Is The Amount Of The Employee Tax Credit? The refundable Employee Retention Tax Credit was equivalent to 50% of qualifying earnings eligible firms paid employees when the Govt. brought the CARES Act into law. But according to the CAA, employers who qualify in 2021 can now claim a credit against 70% of qualified wages. The credit currently allows for $10,000 in eligible wages per employee each quarter. All companies, regardless of size, are eligible for the credit, including tax-exempt organizations. There are just two exceptions which are: State and local governments and their agents, and Small firms that take out small business loans To qualify, the employer must pass one of two alternative tests. The tests are determined each calendar quarter if a government order totally or partially halts the employer’s business according to COVID-19 during the calendar quarter. Or if the employer’s gross revenues were less than 50% of the same quarter in 2019. Once the employer’s gross receipts exceeded 80% of a similar quarter in 2019, they are no longer eligible at the end of that quarter. Who Can Get An ERTC? There is no application for Employee Retention Tax Credit. On the other hand, employers can claim the Employee Retention Tax Credit on their federal employment tax filings. In most circumstances, this entails filing Form 941, Employer’s Quarterly Federal Tax Return. If an employer discovers that they qualify for the credit, they can update their Form 941. Depending on your business, you may also claim the credit on Form 944, Employer’s Annual Federal Tax Return, or Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees. On your federal employment tax return, provide the entire qualified leave wages. If your federal employment taxes do not cover the payments, you can request an advance of the credits by completing Form 7200, Advance Payment of Employer Credits Due to COVID-19. What Do You Have To Do? Fill out Form 7200 as soon as possible after concluding the quarter in which you paid the eligible salaries. Don’t forget to account for the advance amounts when filing Forms 941, 944, or 943. The IRS states that Form 7200 can be used to obtain an advance payment for the ERTC until August 2, 2021. Furthermore, new enterprises incorporated after December 31, 2020, cannot file Form 7200 to request an advance payment of the Employee Retention Credit. Employer eligibility for the ERTC is determined by one of the following characteristics, and one of these elements must be present in the calendar quarter in which the employer chooses to use the credit: Due to governmental directives, businesses have had their activities completely or partially interrupted or have had to decrease their hours Businesses that have started a trade or company after February 2020 Businesses that saw a 50% decrease in 2020 in comparison to 2019 Businesses that saw a 20 percent decrease from 2019 to 2021 Recovery Only for the third and fourth quarters of 2021 Businesses that suffered a large drop in quarterly gross income compared to 2019 Businesses that have yearly gross receipts of less than $1 million How Is Employee Retention Tax Credit Calculated? The credit equals 50% of eligible earnings paid up to a total of $10,000. It applies to earnings paid after March 13 but before December 31, 2020. The definition of qualifying salaries changes depending on whether a firm had more or less than 100 workers on average in 2019. If the firm had 100 or fewer workers on average in 2019, the credit is based on wages given to all employees regardless of whether they worked. In other words, the employer still receives credit even if the employees worked full-time and were paid for it. If the firm employed more than 100 people on average in 2019, the credit is only available for salaries given to workers who did not work during the calendar quarter. Wages include not just monetary compensation but also a percentage of the cost of employer-provided health care in both circumstances. Can You Get ERTC and the PPP? When requesting PPP forgiveness, eligible enterprises can claim the ERTC on earnings that are not spent for payroll expenditures. Businesses can examine their payroll expenditures to see whether they can get 100% PPP debt forgiveness and optimize their ERTC. Businesses can declare up to 40% of eligible non-payroll expenditures on their PPP debt forgiveness application. IRS Form 941 is used to claim the ERTC. An eligible firm may deduct the authorized ERTC amount from its federal employment tax contributions. If the ERTC exceeds the remaining federal employment tax payments for that quarter, the firm may file Form 7200 to request an advance refund. A form 941-X must be filed to claim the ERTC for previously filed quarters. Conclusion Every business that may be eligible is encouraged to get better familiar with the ERTC regulations to evaluate eligibility. The ERTC can issue large reimbursements dependent on the number of employees and the number of qualifying quarters. Furthermore, there are intricacies to optimizing the program, so every company should learn about it and analyze the potential. Eligible firms can file an updated Form 941 for earlier quarters, participate in the program, and recover tax refunds to help […]

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ERTC Funds for Medical and Dental Practices

During the epidemic, an economic collapse severely hit medical practices, dental practices, and hospital-affiliated groups. Those who had their activities interrupted due to pandemic-related governmental directives still have the option of receiving monetary relief. This can be in the form of a refundable employee payroll tax credit known as the Employee Retention Tax Credit. The ERTC is a cash refund via payroll tax that has been made available to medical and dental practices. It also includes privately-owned practices. This short guide will show you how to receive ERTC funds for both medical and dental practices. The focus of the ERTC is on practices that have been negatively impacted by the imposition of lockdowns that took place globally and halted office activities. As a result, this prevented access to hospitals and restricted the ability of professionals who performed elective procedures that are not crucial or have experienced steep declines in their incomes. Many businesses are fully acquainted with the ERTC, but there is still uncertainty about the criteria and application processes. The ERTC incentivizes and credits companies that keep their employees on the payroll. This is true even though they are not working during a covered time owing to COVID-19. It is a refundable tax credit against certain employment taxes. It applies to a percentage of qualifying earnings paid to employees by an eligible employer. ERTC Funds for Medical and Dental Practices, who qualifies? Employers can qualify if they have a complete or partial suspension of their activities. This suspension can be owing to directives from an authorized governmental entity. Or it can also be due to if their gross receipts have decreased, as indicated further below. Almost every state government has implemented a moratorium on elective procedures. This may result in certain healthcare providers qualifying for the ERTC even if they don’t achieve the gross revenue decrease. Other eligible examples include reduced patient visits. The cause can be owing to capacity constraints or the closure of an office to comply with sanitary standards. Healthcare providers who believe they may have been partially affected due to COVID-19 should carefully assess their ERTC eligibility. Examples of medical, dental, and hospital-affiliated groups that have qualified: A medical practice with waiting room capacity limits A medical device business whose technicians were barred from visiting a hospital because of COVID directives A practice in which hospital access limitations prevented certain medical operations from being performed A physical treatment clinic with rigorous spacing rules, limiting the number of patients who might be seen in a day A medical practice whose doctors were prohibited by COVID directives from performing elective treatments Dental or medical offices that were forced to close owing to COVID regulations and later reopened with limits on the number of patients they may treat How To Get The Employee Retention Credit If you own a medical or dental practice that underwent full or partial suspension of operations because of lockdown restriction due to COVID-19, you can qualify as an Eligible Employer for ERTC purposes. In the first, second, and third quarters of 2021, if the business’s gross revenues are more than 20% lower than the organization’s gross receipts in the comparable calendar quarter of 2019, the organization will qualify as an Eligible Employer. The gross revenue reduction criteria for 2020 are more difficult to satisfy because a higher than 50% fall is required. Medical or dental offices with 100 or fewer full-time employees are entitled to the maximum benefits available under the ERTC calculations for the 2020 ERTC if they continue to be Eligible Employers under either the Government Mandate Test or the Gross Receipts Test. For the 2021 ERTCs, the Government relaxed this restriction by raising the full-time employee level to 500 or less. Credit Rates 2020 Credit: 50% of eligible salary, plus employer-paid healthcare, paid to each employee. Wages for qualified employees are limited to $10,000 per employee 2021 Credits: For the first, second, and third calendar quarters, each employee receives 70% of eligible salaries, including employer-paid healthcare. Wages for qualified employees are limited to $10,000 each quarter The Interaction with PPP Loans Businesses that have obtained Paycheck Protection Program loans are also eligible for the ERTC. When the ERTC was initially permitted as part of the CARES Act, entities who received PPP funds were legally barred from claiming an ERTC. Later, when the ERTC was expanded and improved as part of the Consolidated Appropriations Act in December 2020, the legislative limitation on PPP participants collecting ERTC benefits was lifted. So, even if they obtained PPP financing, all medical and dental practices, including those controlled by private equity, should reconsider their eligibility for ERTC. Because of the large number of government directives limiting routine activity in 2020 and 2021, several firms are obtaining significant monetary advantages in addition to PPP incentives. Conclusion It is extremely challenging to use the Employee Retention Tax Credit to earn the maximum advantage you may be qualified for, especially since “proper government authority” extends to state and local government directives. Consult with TPG to discover whether you are eligible for a credit and for how much. This is especially critical if you took out a Paycheck Protection Program loan since, while Congress extended eligibility for the Employee Retention Tax Credit to PPP borrowers, they also placed safeguards in place to prevent double-dipping. Again, given the intricacy of these two programs, medical and dental practices must work with a good financial advisor to properly utilize the tax credit. So, contact us now to see how TPG can help maximize the assistance for your business. ARE YOU EAGER TO PROCESS YOUR ERTC CLAIM BUT DON’T KNOW WHERE TO BEGIN? Get in touch with a TPG Specialist; a professional that will be there for you and your business! We share your passion for a job well done! Just call 909.466.7876 today! […]

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Is the Employee Retention Credit Taxable Income? 

Is the Employee Retention Credit taxable income? The employee retention credit was a major blessing for small businesses during COVID-19. This gave over 30,000 of them the opportunity to receive more than 1 billion dollars in credit. This significant credit amount benefitted these businesses immensely. How? They received 50% worth of refunds for as much as $10,000 of qualifying wages for each employee in 2020. This brought the overall amount for qualifying wages to $5,000 per employee.  An amendment in 2021 allowed eligible businesses to decrease as much as 70% for $10,000 of qualifying employee wages for each quarter. This totals the credit amount to a limit for $28,000 for each employee per year. Since such a high refund is available, this raises the question: is the employee retention credit taxable income?  WOULD YOU LIKE TO SPEAK TO A LIVE REPRESENTATIVE? CALL A TPG ERC SPECIALIST TODAY, AT 909.466.7876!orBook a meeting now and benefit from our specialist’s knowledge on the ERC Program. We want to make sure you make the best decisions for you, your business, and your employees! Continue reading this article to know all the essential information regarding Employee Retention Credit and Income Tax.  Is the Employee Retention Credit Taxable? – The connection between tax and refund  It is important to note that the employee retention credit is not exclusively a tax. On the contrary, it is a tax credit that is refundable for employee wages that qualify. For 2020, the rule suggests that the maximum limit for credit that a business could not exceed $5,000 per employee. On the other hand, the highest credit for each employee in 2021 is $28,000.  The process indicates that you remove the ERC for your total income. This credit becomes a part of the rules for expense disallowance, which comes under the IRS notice for tax 2020-21, FAQs 85 and 86, and Q&A 60-61.  Since so many rules are involved, you may feel overwhelmed. However, FAQ 85 claims that the IRS code refuses deduction for salaries to be paid as much as specific credits for a tax year. This comes with the requirement to subtract your total deductions by the credit amount for ERC.  Additionally, FAQ 86 claims that all employers who receive a credit tax for healthcare costs and qualifying wages should not incorporate the gross income credit for federal income tax. Therefore, you cannot opt for this credit while decreasing the employer’s relevant employment taxes. You also cannot include the credit’s refundable portion in it.  The impact of ERC on tax return for income  The IRS 280C does not relate the refund to be taxable. However, the amount for credit reduces the wages by the credit amount. This subtraction is centered on the year when you have paid the wages. Therefore, a 2021 credit shows across your tax return for 2021, regardless of having received the fund.  On the other hand, if you did not file for ERC in quarters of 2020 and 2021 and wish to claim in 2022, you can’t accommodate your wages to the 2022 tax return. Additionally, business partnerships should file a request for an updated administrative adjustment. Small businesses claim updated tax returns for income for years when they are not adjusting wages or claiming credit.  PPP vs. ERC regarding income tax (federal)  It’s notable that your business may be eligible to receive ERC even if it’s participated in the Paycheck Protection Program. The consolidated appropriations act of 2021 was updated to permit businesses to benefit from both programs.  This legislature law reversed the rulings set in place by the IRS and allowed reductions to PPP loan forgiveness. Additionally, the IRS opted for the reimbursement law for expenses and tax code of 265 to reflect their dedication. The ERC disallowance expense opts for the 280C that covers all reimbursements for tax credit and their connection to expenses.  The disallowance for PPP expense ruling took place in the same year when the borrower received their funds. Therefore, businesses which claim ERC 2020 cannot use their funds until they are in ownership of the refund.  If you attempt to claim ERC for 2020 in 2022, you are not eligible to take disallowance expense. Why? Because the disallowance expense specifically applies to 2020. After 2020, no income deferral related to ERC is valid. The reason is simple: businesses only fulfill requirements for claiming ERC in the year when they are eligible to claim the disallowance expense. This pertains to the Revenue Ruling 2020-27 and comes with the rule that an expense deduction must take place in the same year as when the business earns the credit according to the Treasury Regulations 1.280C-1.  The year that calls for the deduction and recognition for income must fulfill the following criteria because these are made based on accruals:  The year when all the events that take place fix the taxpayer’s right to income or the liability of the one who pays the tax  The year when you’re able to decide the number with adequate accuracy  Applying these rules to the process is fairly difficult because neither ERC nor PPP is a deduction or an income.  The ERC provisions in 2021  The 2021 ERC raised the allowable credit amount for each employee. Therefore, businesses can apply for 70% of each $10,000 for eligible wages for every quarter. Additionally, the gross receipts requirement has also decreased.  The 2020 ERC expense disallowance is also applicable to 2021. Since most businesses claim the 2021 ERC every quarter, the expense disallowance does not cause timing to be much of a problem.  What if a business hasn’t applied or filed for ERC?  It is important to note that you do not apply to claim your credit on the tax return for yearly income. Since ERC is not in the picture anymore, you must qualify for an amended return with Form 941-X if you want to claim any credits.  The government’s rule suggests that businesses submit an amendment up to 3 years from the initial filing […]

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FAQs for PPP and ERTC Filing

The pandemic took a toll on many economies and individuals. However, small businesses took the biggest hit. Therefore, the ERTC (Employee Retention Tax Credit or ERC – Employee Retention Credit) and PPP (Paycheck Protection Program) was formed to keep these small businesses from drowning at the hands of COVID-19. The core purpose of these two programs was to motivate employers to keep their employees on the payroll, whether they worked during the payroll period or not. However, many FAQs for PPP and ERTC are being asked. Various legislation laws allow companies to request employee retention tax credits. Additionally, these also offer guidance on the collaboration between PPP and ERTC. Therefore, if you need insight into claiming your business’s tax credits and want to learn more about these programs, continue reading this ERTC loan guide. What Is an ERTC Loan? Various laws were set in place to aid those affected by the pandemic. These included the CARES (Coronavirus Aid, Relief, and Economic Security) Act, which took the liberty of authorizing the Employee Retention Tax Credit. This form of payroll tax credit is refundable and motivates employers to sustain their employees on the payroll. This also applies to those who did not work during the payroll period because of COVID-19. Therefore, if you owned a business and had to shut it down due to a government order amid the pandemic, you may be able to claim this employee retention tax credit. Moreover, you can even claim this if you were subject to a substantial decrease in gross receipts. What Is A PPP Loan For? The PPP loan, also known as the Paycheck Protection Program loan, was formed to offer forgivable loans. Like the Employee Retention Tax Credit loan, the PPP loan aims to sustain employees on their payroll. This allows employers to re-employ workers who were laid off and lost salaries due to COVID-19. The Connection Between the ERTC and the PPP The original norm suggested that the PPP and the ERTC were exclusive, and someone who gets the ERTC could not claim the PPP. However, the Consolidated Appropriations Act 2021 reversed this rule. Therefore, if you get a PPP loan, you still can claim the ERTC. Continue reading for more FAQs for PPP and ERTC filing. What Are the Consolidated Appropriations Act Updates? All amendments for the Consolidated Appropriations Act 2021 particularly apply between March 13th, 2020, to December 31st, 2020. This allows your business to still be eligible for the Employee Retention Tax Credit. However, this only applies to the wages that were not paid with your PPP loan funds. The Consolidated Appropriations Act update also offers the incentive of claiming group healthcare expenses by considering these as part of qualified wages. This is still valid even if your workers did not receive any wages. NEED FURTHER ASSISTANCE UNDERSTANDING THESE FAQs FOR PPP AND ERTC?A TPG PAYROLL & HR SPECIALIST CAN HELP YOU! Get in touch with one of our representatives now and discover more about the requirements applicable to your company or call our office today at 909.466.7876. We want to help you grow your business! What Are Employee Retention Tax Credit Updates? Employee Retention Tax Credit was updated by increasing the rate per worker from 50% to 70%. Additionally, the wage limit for every employee will be raised from $10,000 yearly to $10,000 quarterly in 2021. This update states that a business’ eligibility now depends on gross receipts lower than 80% in comparison to the same quarter in 2019. The implication is that if your gross receipts fall more than 20% in 2021, you can claim the ERTC credit. What Are the Common Concerns Regarding the PPP and the ERTC? It is common for people to have some concerns if they file for the ERTC before the PPP forgiveness loan. Generally, most people who filed for the first round of PPP loans did so before the Consolidated Appropriations Act was passed. Businesses that fell under this category had their wages reported for the PPP and were excluded from the ERTC eligible wages. Therefore, the leftover wages were used for the Employee Retention Tax Credit. Most businesses ended their PPP second application period near the end of the 3rd quarter in 2021. However, eligible companies managed to file amended 941X forms for the ERTC during the second quarter. What Are the PPP Loan Forgiveness Concerns? A core issue arises if you file for the ERTC loan before receiving forgiveness for the PPP loan. For example, suppose your business received $800,000 from the second application for the PPP loan on January 1st and $480,000 in salaries for quarters 1 and 2. In that case, this amount may be adequate to cover the PPP loan when you file for the PPP forgiveness. On the contrary, if the eligibility criteria for ERTC was $240,000 dollars per quarter, and you file for the ERTC before the PPP, only $320,000 will be leftover in salaries for the PPP forgiveness. Although you can opt to cover maximum expenses that aren’t payroll related for the PPP loan forgiveness, the payroll needs to be at least 60% of the total expenses. Therefore, the above scenario would require you to report $480,000 of your PPP forgiveness, but it is common for business owners to go against that. How Can I Maximize the ERTC? If you wish to maximize the Employee Retention Tax Credit, you need to have a consistent plan to minimize any surprises you may have when you file for the PPP loan forgiveness. For example, it would help you to keep track of qualified non-payroll expenses. When the requirement only allows a business owner to report roughly 40% of the total loan amount as non-payroll expenses, they are helped because it frees up wages that can be used for the Employee Retention Tax Credit. Businesses that applied for PPP 1 loan forgiveness in mid-2020 can claim other non-payroll expenses such as software expenditures, supplier costs, and worker protection expenses. How Do I Review My ERTC […]

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