Small business owners, listen up! If you’re looking for actionable ways to save money and keep your employees happy, you’ve got there’s good news. You can make the most of Employee Retention Credit (ERC).
The tax credit emerged during the pandemic to help businesses. And the good thing is that it’s still available in 2023!
But many business owners are leaving money on the table by missing out on it. Well, you can take advantage of the ERC even today, provided you know what it’s all about.
Lucky for you, we’ve got a guide here to break down the ERC and show how to maximize it and keep your employees around for the long haul. Here you go!
Know the eligibility criteria
Not every business can claim all tax credits, no matter how attractive they appear. To take advantage of the ERC, you must meet some eligibility criteria, such as-
- Your business must have been in operation in 2020 or 2021.
- It must have gone through a significant decline in gross receipts during these years, compared to the same quarter in 2019.
- You must have experienced a full or partial suspension of operations due to a government order if you had more than 500 employees on the roll in 2019
Keep accurate records
Accurate records are the mainstay of all aspects of taxes, and the ERC is no exception. Remember to have accurate and complete records of gross receipts and employee wages at hand.
Also, maintain detailed records of your payroll expenses and business operations. They help with credit calculations and provide evidence in case of an IRS audit.
Maximize the amount
The ERC stands at 50% of qualified wages, with a maximum limit of $10,000 per employee for 2020. The limit for ERC 2021 was $10,000 per quarter, and the credit increased to 70%. To maximize this amount, you can:
- Claim the credit for all eligible employees
- Leverage the maximum wage amount for each employee
- Take advantage of the retroactive changes to the ERC
The good news is that you can retroactively file your ERC claim in 2023. Just stay ahead of the limits and calculations, and you’re good to go!
Use the credit for employee retention
The objective of ERC was to help businesses keep their employees employed during the crisis. Even as you claim credit in 2023, you shouldn’t get complacent with the original purpose of the initiative.
You can use it for employee retention by paying benefits and covering the cost of health insurance premiums. Consider it an opportunity to build a loyal workforce and improve your bottom line.
Consult a tax professional
Undoubtedly, employee retention credit can lower your tax bills, but it can be complex for a business owner.
The regulations surrounding it can get overwhelming. If you have doubts, you must consult a tax professional.
An expert can help you understand the eligibility criteria, calculate the credit amount, and ensure compliance with all the rules and regulations.
Conclusion
The ERC can be a valuable tool for small business owners looking to save money and retain their employees.
But you’ll probably think that it was just for the pandemic times. The good thing is that you can still get it and keep your business running smoothly in 2023. Follow these tips, and you’ve got it!