The Employee Retention Tax Credit (ERTC) is a valuable tax incentive designed to support businesses in retaining their employees during challenging times. Introduced as part of the CARES Act in 2020, the ERTC has undergone significant changes, making it essential for employers to stay up-to-date on the latest regulations. This comprehensive guide will walk you through the 2024 ERTC, covering eligibility, calculation, and application procedures.
Eligibility Criteria:
To qualify for the ERTC, businesses must meet one of the following conditions:
- Full or partial suspension of operations due to government orders related to COVID-19.
- Significant decline in gross receipts compared to the same period in the previous year.
The eligibility period for the ERTC has been extended to include:
– March 13, 2020, to December 31, 2020
– January 1, 2021, to September 30, 2021
– October 1, 2021, to December 31, 2021 (only for recovery startup businesses)
Calculation of the ERTC:
The ERTC is a refundable tax credit of up to 70% of qualified wages, capped at $10,000 per employee per quarter. For 2024, the credit calculation remains the same:
- Determine the qualified wages for each employee.
- Calculate the credit amount (70% of qualified wages).
- Apply the credit limit ($10,000 per employee per quarter).
Application Procedures:
To claim the ERTC, follow these steps:
- Review your business’s eligibility and calculate the credit amount.
- File Form 5884-B, Employee Retention Credit, with the IRS.
- Attach supporting documentation, including:
– Records of qualified wages and related health insurance costs.
– Proof of government orders or significant decline in gross receipts.
Key Considerations for 2024:
– The ERTC is a refundable credit, allowing businesses to receive a refund even if the credit exceeds their tax liability.
– Employers can claim the ERTC in addition to other tax credits, such as the Paycheck Protection Program (PPP).
– The IRS offers guidance and resources to help businesses navigate the ERTC application process.
Conclusion:
The Employee Retention Tax Credit is a vital tool for businesses seeking to retain their employees during challenging times. By understanding the eligibility criteria, calculation, and application procedures, employers can take advantage of this valuable tax incentive. Stay informed about the latest developments and consult with a tax professional to ensure you maximize your ERTC benefits in 2024.