Learn How to Claim the Employee Retention Tax Credit
ERTC and PPP cannot be used on the same payroll.
One of the most major improvements made to the ERTC by Congress in late 2020 was to allow employers who took first- and second-draw PPP loans to also use the ERTC. If your employer did take a PPP loan, however, you cannot claim the ERTC for the same salaries that were counted for PPP forgiveness. In essence, you cannot claim the same payroll costs for ERTC and PPP.
How to Apply for the ERTC
Companies who want to take advantage of the ERTC must submit their entire eligible earnings and health insurance costs on their quarterly tax returns (Form 941 for most employers). This refundable credit will be applied to the employer’s Social Security tax.
Employers may choose to keep the value of employment taxes up to the amount of the ERTC rather than deposit it before getting the credit without penalty. Eligible firms with less than 500 full-time employees may also obtain ERTC advance payment using IRS Form 7200.
Employers with more than 500 employees are ineligible for advanceable ERTC. Despite the fact that the ERTC expired on October 1, 2021, businesses can still seek for a retroactive refund using Form 941-X.
This form can be used to alter employment taxes that have been filed within three years of the initial return or two years after the employer has paid the tax. As a result, qualifying businesses that did not initially claim their ERTC may be allowed to do so until 2024, depending on when their business taxes were first submitted or paid.
Employers should keep in mind that this retroactive reimbursement is only available for the 2020 tax year and the first three quarters of the 2021 tax year; the eligibility criteria do not apply for the fourth quarter of 2021, nor for the 2022 tax year or later.
