EMPLOYEE RETENTION CREDIT
Employee Retention Credit services for employers impacted by COVID-19 maximize benefits and leverage reports fully substantiated for IRS auditing, with little disruption to your business operations.
Now, it’s easier to qualify, more employers are eligible and more credits are available to businesses of all sizes. The maximum employee retention credit per employee increased from $5,000 to $14,000 and employers who took PPP loans are now retroactively eligible.
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TCC has combined the best Big 4, IRS and industry resources together to form a cohesive team with a relentless work ethic and technology that is easy to integrate with.”
– Director of Tax, Fortune 100 company
The TCC Advantage
Combination of enterprise payroll data capabilities/technology and IRS tax credit consulting/expertise.
Access to a specialized and experienced team of experts focused on ERC for businesses. High level of service – easy to work with.
Entrepreneurial approach with audit-ready quality standards balance risk and reward for the optimal result.
Chief Executive Officer
Employee Retention Credit
The ERC calculation and documentation process provided by TCC is designed to maximize the credit while fully validating the adherence to statutory requirements and recommended record keeping, resulting in a comprehensive, audit-ready deliverable.
TCC employs a centralized, technology-enabled process with built-in quality control processes. The process prioritizes efficiency and quality, with the goal of providing the most comprehensive deliverable while minimizing the impact to the client’s business operations.
TCC provides a complete, audit-ready deliverable covering the calculated tax credit. The deliverable is designed to respond to all statutory and applicable regulatory requirements regarding the claim. Audits of the tax credit claims follow a three-year rolling quarterly statute of limitations.
Employee Retention Credit FAQs
The Employee Retention Credit is a fully refundable tax credit for eligible employers that paid qualified wages (including allocable qualified health plan expenses) to employees during the COVID-19 pandemic. The credit initiated via the CARES Act applied to qualified wages paid after March 12, 2020, and before January 1, 2021. For that period, the maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, and the credit is 50% of qualified wages for a maximum credit of $5,000 per employee. The Consolidated Appropriations Act of 2021 extended this credit for wages paid on or after January 1, 2021 and before July 1, 2021. The new legislation also increased the qualified wages and credit percentage to 70% of $10,000 for each calendar quarter, for a possible credit of up to $14,000 per employee.
The tax credit offsets all withheld federal employment taxes including federal income tax withholding, Employer FICA and Medicare. Any excess credit will be refunded or advanced by the IRS.
Eligible Employers for the purposes of the Employee Retention Credit are those that carry on a trade or business during calendar year 2020, including a tax-exempt organization, that either:
- Fully or partially suspends operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
- Experiences a significant decline in gross receipts during the calendar quarter.
For 2020, a significant decline in gross receipts means a decline of at least 50% compared to the comparable quarter in 2019. In 2021 this threshold has been reduced to a decline of at least 20%.
While the CARES Act originally barred employers that had taken a Payroll Protection Plan (PPP) loan from also taking the ERC, the Consolidated Appropriations Act changed this rule such that employers that have already taken a PPP loan may also be eligible for the ERC.
The operation of a trade or business may be partially suspended if an appropriate governmental authority imposes restrictions upon the business operations by limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19 such that operation can still continue to operation but not at its normal capacity.
For employers with at least 100 employees, qualified wages are compensation provided to an employee after March 12, 2020 for time the employee is not providing services. Qualified wages include the Eligible Employer’s qualified health plan expenses that are properly allocable to the wages. For small employers with fewer than 100 employees, compensation paid even when employees were providing services are qualified wages. For 2021, small employers are those with fewer than 500 employees.
Wages must not be more than the employee would have been paid for working an equivalent duration during the immediately preceding month (though this rule has been changed for 2021). Employers may not use the same wages for a Work Opportunity Tax Credit (WOTC) calculation.
Like most economic development business tax incentive programs, the Employee Retention Credit (ERC) has certain complexities that may impact receiving an accurate, optimized and audit-ready number that is less straightforward than typical reporting alone. It is important to fully document processes and procedures, organize your records, and avoid any risk areas in advance of a potential IRS audit of the claim, which may come years later.
Tax payers need to pay attention to issues such as normalizing pay rates, documenting qualification criteria methodology, validating other requirements, allocating healthcare expenses to the appropriate time periods, the correct interaction between the credit and PPP loans, etc. The use of experienced consultants with IRS controversy experience may help to document and streamline the process which would include gathering and analyzing multiple data elements and logging required filings.
The Canadian government established the Canada Emergency Wage Subsidy (CEWS) program. It provides eligible employers with potentially a 75% wage subsidy for up to 12 weeks. The CEWS goal is to encourage employers to retain and re-hire workers previously laid off as a result of COVID-19. Learn more about the CEWS program here.
TCC will assess the size and complexity of the project and quote a fee that is inclusive of all services provided.
Visit our ERC resources page here to answer any additional questions you may have.