The Employee Retention Tax Credit Could Help Your Company Save Money
The COVID-19 pandemic is dragging on into its second year, like a song with a catchy riff that eventually trails off into an endless outro of guitar noodling. The number of new COVID-19 infections is decreasing in most states, more people are getting vaccinated, and there are murmurings that some once-normal activities might be safe to engage in again. Further adding to the feeling of slow motion is that in 2021, as in 2021, tax season extends well beyond April 15. Individuals have until May 17 to file their income tax returns, and many businesses are still in the process of filing their tax returns, too. Tax season is often a source of stress for business owners, so you will be relieved to find out about a business tax credit that the IRS recently decided to make available this year. The Employee Retention Credit is only one way you can help your company afford to keep its employees on the payroll; to strategize about the big picture of how your business can keep more people employed, contact a Washington DC business law attorney.
Employee Retention Tax Credit Eligibility
Here are some ways that business owners in the DC area can benefit from the Employee Retention Tax Credit:
- For the first half of 2021, you can get a tax credit of up to $14,000 per full time employee. It is a refundable credit against the employer’s share of Social Security tax. You are eligible for this tax credit if your company experiences a 20 percent reduction in gross income in the first half of 2021, or if government mandates require a full or partial suspension of your company’s activities during this period.
- If your company experiences a 20 percent drop in revenue or a government-mandated shutdown in the second half of 2021, the Employee Retention Tax Credit also applies. In this case, the amount is credited against the total employment taxes, including Medicare.
- If your company experienced at least a 50 percent decrease in quarterly gross receipts from one quarter of 2019 to the equivalent quarter of 2020, you can get a tax credit of up to $5,000 per employee.
- If your company has 500 employees or fewer, the tax credit applies whether the employees were working or not. For larger companies (with more than 500 employees), the tax credit only applies to quarters when the employees were receiving pay but were not actively working.
- PPP loan recipients are eligible for the Employee Retention Tax Credit. If your PPP loan has been forgiven, you are not eligible for the tax credit.
Your tax professional and your small business lawyer can help you determine which business tax credits you can claim this year. Making mistakes on your business tax returns can be very costly.
Let Us Help You Today
A Washington DC small business lawyer can help you with all the official paperwork your company needs to file with the IRS and other government entities. Contact Tobin, O’Connor & Ewing for help today.