Frequently asked questions.
Financial Match
1. Can I qualify for Employee Retention Tax Credit if I am a 1099 contractor?
No, as a 1099 contractor, you are considered self-employed and not an employee of the company. Therefore, you cannot qualify for the Employee Retention Tax Credit based on your own wages or compensation. However, if you have employees working for you, you may be eligible to claim the credit for wages paid to those employees if you meet the eligibility criteria.
2 . Can I qualify for Employee Retention Tax Credit If I don't have any W2 employees?
No, As a sole proprietor or self-employed individual without any W-2 employees, you would not be eligible to claim the Employee Retention Tax Credit for wages paid to employees. However, you may be eligible for other forms of COVID-19-related relief, such as the Paycheck Protection Program (PPP) or Economic Injury Disaster Loan (EIDL) program. You may also be eligible for other tax credits or deductions related to COVID-19, such as the sick and family leave credits.
3. Can I qualify for Employee Retention Tax Credit when I got a PPP loan?
Yes, you can still qualify for the Employee Retention Tax Credit even if you received a Paycheck Protection Program (PPP) loan. However, the same wages used to qualify for forgiveness of the PPP loan cannot be used for the Employee Retention Tax Credit. In other words, if you use certain wages to calculate forgiveness of your PPP loan, you cannot also use those same wages to claim the Employee Retention Tax Credit. You will need to carefully review your payroll records to determine which wages can be used for the credit and which wages were used for PPP loan forgiveness. Additionally, there are certain limitations and restrictions on claiming both the PPP loan and the Employee Retention Tax Credit for the same wages, so it is important to consult with a tax professional to ensure that you are following the rules correctly.
4 . What if my revenue went up in 2020 or 2021? Can I still qualify for Employee Retention Tax Credit?
If your business experienced an increase in revenue in 2020 or 2021 compared to the same period in the prior year, you may still be eligible for the Employee Retention Tax Credit if your business was impacted by a government shutdown order or a significant decline in gross receipts. Specifically, you may qualify for the credit if your gross receipts in any quarter of 2020 or 2021 were less than 80% of the gross receipts in the same quarter in 2019.
Alternatively, if you were not in business in 2019, you can compare your gross receipts in any quarter of 2020 or 2021 to the same quarter in 2020. If your gross receipts declined by more than 20%, you may be eligible for the credit.
It is important to note that the eligibility requirements for the Employee Retention Tax Credit can be complex, and there are various factors to consider when determining eligibility. It is best to consult with a tax professional to determine your eligibility and to ensure that you are properly calculating the credit.
5. How long is the ERC program open for?
The Employee Retention Tax Credit program has been extended several times since its inception in March 2020. As of September 2021, the program has been extended through December 31, 2021, meaning eligible employers can claim the credit for wages paid through the end of the year. The deadline is April 2023
However, it is possible that the program may be extended again in the future, depending on the ongoing COVID-19 pandemic and its impact on businesses. It is important to stay up-to-date on any changes or updates to the program and to consult with a tax professional for guidance on eligibility and claiming the credit.
6. What if I have a bad credit? Is there a credit check for ERC?
No, there is no credit check required for the Employee Retention Tax Credit (ERC). The ERC is a tax credit that eligible employers can claim on their federal employment tax returns, so creditworthiness is not a factor in determining eligibility.
However, it is important to note that there are certain eligibility requirements for the ERC, such as having a significant decline in gross receipts or being subject to a government shutdown order. Additionally, there are various rules and limitations on claiming the credit, so it is important to consult with a tax professional to ensure that you are properly calculating the credit and following all applicable guidelines.
7. Can I qualify for ERC if my business is now closed?
Yes, If your business closed temporarily due to a government shutdown order or a significant decline in gross receipts, you may still be eligible for the ERC for the wages you paid to employees during the time that your business was still operating.
But If your business has permanently closed and you are no longer paying wages to employees, you would not be eligible for the Employee Retention Tax Credit (ERC). The ERC is a tax credit for eligible employers who continue to pay wages to their employees during the COVID-19 pandemic.
Tax Credit
1. What documents do I need to send you?
To complete your tax credit, we’ll work with you and your CPA to get the following documents:
Payroll Journals outlining all payments, deductions, contributions and taxes for each employee for each paycheck during your ERC eligibility period.
- Filed 941, 943 or 944 payroll reports.
- Profit and Loss Statements (P&Ls) for 2020 and 2021
- Tax returns for 2020 and 2021
- PPP Loan Forgiveness Application (if applicable)
From ChatGPT
Proof of eligibility: You will need to demonstrate that you meet the eligibility requirements for the credit, such as a significant decline in gross receipts or a government shutdown order. You should maintain records of any relevant financial statements, tax returns, or other documentation to support your eligibility.
Employee wage and employment records: You will need to maintain records of the wages and compensation paid to your employees during the relevant period for which you are claiming the credit. This includes information on the number of hours worked, the rate of pay, and any qualified health plan expenses.
Records of employment taxes: You will need to maintain records of any employment taxes paid during the relevant period, including federal income tax withholding, Social Security and Medicare taxes, and any other applicable payroll taxes.
PPP loan records: If you received a Paycheck Protection Program (PPP) loan, you will need to maintain records of the loan and any forgiveness received. You will need to carefully review your payroll records to determine which wages can be used for the credit and which wages were used for PPP loan forgiveness.
Other relevant documentation: Depending on your specific circumstances, you may need to maintain other records or documentation to support your claim for the credit, such as records of business closures or other COVID-19-related disruptions.
2 . Do I need to repay the tax credit?
You should not have to repay the Employee Retention Tax Credit (ERC) if you are eligible and properly claim the credit. The ERC is a tax credit, not a loan, and does not need to be repaid as long as you meet the eligibility requirements and follow the applicable rules and guidelines.
3. How long does it take to get my credit?
The timeline for receiving the Employee Retention Tax Credit (ERC) can vary depending on a number of factors, including the complexity of your tax situation, the volume of claims being processed by the IRS, and the accuracy of the information you provide.
Generally, the IRS aims to process most tax returns within 21 days of receipt. However, given the volume of claims for the ERC and other COVID-19-related tax credits, processing times may be longer than usual like 7-9 Months!
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4 .When do the ERC funds run out?
The ERC is funded by the federal government, and there is no set limit for the program yet.
5.What if I have back taxes on my account with IRS?
If you have back taxes owed to the Internal Revenue Service (IRS), you may still be eligible for the Employee Retention Tax Credit (ERC), but there are some important considerations to keep in mind.
First, it is important to note that the ERC is a refundable tax credit, which means that it can be used to offset any federal tax liability, including back taxes owed to the IRS. However, it is possible that the IRS may apply any refund due to you, including the ERC, to outstanding tax debts that you owe.
In addition, if you have unresolved tax issues or are currently under audit by the IRS, this could delay the processing of your ERC claim or result in additional scrutiny of your eligibility for the credit. It is important to ensure that you have resolved any outstanding tax issues and are in compliance with all applicable tax laws and regulations before claiming the ERC.
6. Is the ERC credit taxable?
The Employee Retention Tax Credit (ERC) is a refundable tax credit that is intended to provide financial relief to eligible employers who are struggling due to the COVID-19 pandemic. While the ERC is taxable income for federal tax purposes, the credit itself is not subject to payroll taxes or other employment taxes.
This means that if you receive the ERC, you will need to report the credit as income on your federal tax return for the year in which you receive it. However, the amount of the credit will not be subject to Social Security or Medicare taxes, and it will not be included in the calculation of your taxable income for purposes of determining your eligibility for other tax credits or deductions.
7. Will I get in trouble with the IRS for filing?
No, you will not get in trouble with the Internal Revenue Service (IRS) for filing a claim for the Employee Retention Tax Credit (ERC) if you are eligible for the credit and have properly calculated and claimed it on your tax return. In fact, the ERC is a government-sponsored program intended to help eligible employers offset the costs of retaining employees during the COVID-19 pandemic.
People also ask
Q: What is the Employee Retention Tax Credit (ERTC)?
A: The Employee Retention Tax Credit is a tax credit offered to employers that have experienced significant revenue loss or have been fully or partially suspended due to COVID-19. The credit is designed to encourage employers to keep employees on their payroll by providing a credit for a portion of the wages paid to employees.
Q: Who is eligible for the Employee Retention Tax Credit?
A: Eligible employers include those who experienced a significant decline in revenue or were fully or partially suspended due to COVID-19. Specifically, employers with gross receipts that are less than 80% of the comparable quarter in 2019 or who were fully or partially suspended by government order are eligible.
Q: How much is the Employee Retention Tax Credit?
A: The amount of the credit is up to 70% of qualified wages paid to employees, up to a maximum of $7,000 per employee per quarter, for a total maximum credit of $28,000 per employee for 2021.
Q: When can I claim the Employee Retention Tax Credit?
A: Employers can claim the credit for qualified wages paid from March 12, 2020, through December 31, 2021.
Q: Can I claim the Employee Retention Tax Credit and PPP loan?
A: Yes, employers can claim the Employee Retention Tax Credit and PPP loan. However, the same wages cannot be used to qualify for both programs.
Q: How do I claim the Employee Retention Tax Credit?
A: Employers can claim the credit on their quarterly employment tax returns. Alternatively, employers can file Form 7200 to request an advance payment of the credit.
Q: What documentation do I need to claim the Employee Retention Tax Credit?
A: Employers must maintain records that support their eligibility for the credit and the amount of the credit claimed. Documentation may include payroll records, financial statements, and other relevant documents.
Q: What happens if I claim too much Employee Retention Tax Credit?
A: If an employer claims too much credit, they will need to repay the excess amount. Additionally, penalties and interest may apply.
Q: Is the Employee Retention Tax Credit taxable income?
A: No, the Employee Retention Tax Credit is not taxable income
Q: Can non-profit organizations claim the Employee Retention Tax Credit?
A: Yes, non-profit organizations that meet the eligibility criteria can claim the Employee Retention Tax Credit.
Q: Can seasonal employers claim the Employee Retention Tax Credit?
A: Yes, seasonal employers can claim the Employee Retention Tax Credit if they meet the eligibility criteria. Seasonal employers are defined as those who operate for no more than seven months in a calendar year or, if the employer has average receipts of less than $1 million for the preceding three years, they operate for no more than eight months in a calendar year.
Q: Can employers claim the Employee Retention Tax Credit for all employees?
A: No, employers cannot claim the credit for all employees. The credit is only available for wages paid to employees who are not providing services due to COVID-19-related reasons or whose services are reduced due to COVID-19-related circumstances.
Q: Can employers claim the Employee Retention Tax Credit for employees who have been furloughed or laid off?
A: No, employers cannot claim the credit for employees who have been furloughed or laid off. The credit is only available for wages paid to employees who are still employed and receiving wages.
Q: Is there a deadline for claiming the Employee Retention Tax Credit?
A: Yes, employers must claim the credit on their employment tax returns for the applicable quarter. The deadline for filing employment tax returns is generally the last day of the month following the end of the quarter. For example, the deadline for filing the Form 941 for the first quarter of 2022 is April 30, 2022.
Q: Can employers claim the Employee Retention Tax Credit for wages paid to family members?
A: No, employers cannot claim the credit for wages paid to family members, including spouses, children, parents, or siblings.
Q: Can employers claim the Employee Retention Tax Credit for wages paid to independent contractors?
A: No, employers cannot claim the credit for wages paid to independent contractors. The credit is only available for wages paid to employees.
Q: Can employers claim the Employee Retention Tax Credit for wages paid to foreign employees?
A: Yes, employers can claim the credit for wages paid to foreign employees who are subject to U.S. employment taxes.
Q: Is there a limit to the amount of Employee Retention Tax Credit that can be claimed by an employer?
A: Yes, the maximum amount of Employee Retention Tax Credit that can be claimed by an employer is $7,000 per employee per quarter for 2021, up to a total maximum credit of $28,000 per employee for 2021.
Q: Are there any restrictions on how the Employee Retention Tax Credit can be used?
A: Yes, the Employee Retention Tax Credit can only be used to offset certain federal employment taxes, including the employer’s portion of social security taxes and Medicare taxes. The credit cannot be used to offset other federal taxes, such as income tax.
Q: Can employers claim the Employee Retention Tax Credit for wages paid to employees who are working remotely?
A: Yes, employers can claim the Employee Retention Tax Credit for wages paid to employees who are working remotely, as long as the employee meets the eligibility criteria for the credit.
Q: Can employers claim the Employee Retention Tax Credit for wages paid to new employees?
A: Yes, employers can claim the Employee Retention Tax Credit for wages paid to new employees, as long as the employee meets the eligibility criteria for the credit. New employees who started after February 15, 2021, are also eligible for the credit.
Q: Can employers claim the Employee Retention Tax Credit for wages paid to employees who are on leave?
A: It depends on the reason for the leave. Employers can claim the credit for wages paid to employees who are on leave due to COVID-19-related reasons, such as caring for a child whose school or daycare is closed. However, employers cannot claim the credit for wages paid to employees who are on leave for other reasons, such as personal reasons or vacation.
Q: Can employers claim the Employee Retention Tax Credit for wages paid to employees who are working reduced hours?
A: Yes, employers can claim the Employee Retention Tax Credit for wages paid to employees who are working reduced hours due to COVID-19-related circumstances. The credit is available for wages paid to employees whose hours are reduced by more than 10% compared to the same quarter in the prior year.
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Phone: (818) 898 9911
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Phone: (818) 898 9911
Email: contact@miod-cpa.com
