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When this tax credit was first introduced, it was worth 50% of qualified employee wages but was limited to $10,000 for any one employee. This granted a maximum credit of $5,000 for wages paid from March 13, 2020, to December 31, 2021.
It was updated soon after, increasing the percentage of qualified wages to 70% for 2021. The per employee wage limit was raised from $10,000 per year to $10,000 per quarter.
The federal government offers a financial benefit to employers in the form of a refundable, advanceable tax credit called an Employee Retention Credit (ERC). Most employers with less than 500 full-time employees are eligible for an ERC, even if they’ve already received a PPP loan, a grant from the Restaurant Revitalization Fund, or any other government aid. Many employers will claim up to $26,000 per employee.
The ERC is a refundable payroll tax credit that employers who meet specific criteria, as detailed in the Consolidated Appropriations Act, 2021, are eligible to receive. If eligible, recipients of the ERC may: For Tax Year 2021: Receive a credit of up to 70% of each employee's qualified wages.
Applying for the ERC in the future requires filing an amended Form 941X (Quarterly Federal Payroll Tax Return) for the quarters in which the company was an eligible employer. .
A startup business can still claim the ERC for wages paid from June 30, 2021 to January 1, 2022. .
Employers who paid qualifying wages can still claim the ERTC by filing Form 941-X, which is the Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund. This can be done for each quarter, up to three years after the original payroll taxes were due (usually April 15).
