Did you know you can get a tax credit for retaining employees during the COVID-19 economic crisis? In the ERC guidance, the IRS mentions when “Qualified Wages”. Do you know which wages are considered “qualified wages” when calculating the “Employee Retention Credit”?
What is the “Employee Retention Credit”?
The Employee Retention Credit is a fully refundable tax credit for employers up to $5,000 for each full-time employee that the employers retained between March 13 and Dec. 31, 2020, and up to $28,000 for each retained employee between Jan.1 and Dec. 31, 2021 ($7,000 each quarter). Applications are allowed despite receiving PPP loans, but the ERC can only be claimed for qualified wages not treated as payroll costs in obtaining forgiveness of the PPP loans.
What are “qualified wages”?
“Wages/compensation, in general, that are subject to FICA taxes, as well as qualified health expenses qualify when calculating the employee retention credit. These must have been paid after March 12, 2020 and qualify for the credit if paid through Dec. 31, 2021. Remember, the credit can only be taken on wages that are not forgiven or expected to be forgiven under PPP. When determining the qualified wages that can be included, an employer must first determine the number of full-time employees. For the purposes of the employee retention credit, a full-time employee is defined as one that in any calendar month in 2019 worked at least 30 hours per week or 130 hours in a month (this is the monthly equivalent of 30 hours per week).”
How Can Summit CPAs Professional Services Help?
Summit CPAs Professional Services has established a dedicated team that is continuously monitoring new guidance from SBA, Treasury, Congress, and IRS, to ensure we have the latest information when advising our clients.
To discuss your eligibility for the ERC and/or accurately calculate your potential credit, feel free to contact us at 305.444.8280