Understanding Employee Retention Tax Credit
Tax is a vital part of running any business or organization, no matter the scale. Whether you are already taking advantage of employee retention tax credit or are just hearing about it for the first time, it can be important for business owners to understand what ERTC actually does.
While the in-depth details of how ERTC works can seem overwhelming, ERTC itself is actually quite a straightforward concept. The hardest part is understanding what this credit is for and how it applies to your business.
What is Employee Retention Tax Credit?
Employee Retention Tax Credit (ERTC), also sometimes known as Employee Retention Credit (ERC), is a refundable tax credit program that was created in response to the COVID-19 pandemic. This provided businesses with a way to pay employees while they were shut down due to the pandemic, a factor that was completely beyond their control.
Through this system, businesses were (and technically still are) able to retain employees without bankrupting themselves in the long term. The credit can pay for employee wages, ensuring that the business does not shut down or lose its employees by the time it should be able to re-open.
Does Employee Retention Tax Credit Still Apply?
While ERTC is obviously meant as a way of supporting businesses that shut down due to COVID-19, that does not mean that you needed to claim it during the bulk of the pandemic. You may still be able to claim it retroactively if your business suffered employee losses or financial losses during the pandemic itself.
Since COVID-19 is technically still a lingering threat, and the system itself is adaptable to suit any similar pandemic, there is also a chance that it may become important in the future. If your business ever goes through a similar situation, ERTC can provide support and prevent you from closing your doors permanently.
Claiming Employee Retention Tax Credit
Claiming employee retention tax credit requires a specific process, and the procedures involved can change depending on when your business qualified for the credit. This means that you will often have to get professional support to claim employee retention credit correctly.
It is important to get the entire process right since claiming this credit poorly (or doing it when you do not even qualify for this) can have a major negative impact on your business. As a business owner, it is a good idea to rely on experts that understand the legal requirements and documentation a claim would need.
Should You Claim Employee Retention Tax Credit?
If you are eligible for this tax credit option, then there is not really a reason not to claim it. Tax credits are a good way to lessen how much your business is spending, and this kind of support has been a key tool for many businesses that have struggled during the pandemic.
Being able to properly retain your employees without bankrupting yourself can be difficult during large-scale shutdowns. With ERTC, you get access to some ‘buffer money’ that can keep employees paid without forcing you to spend your own money in a period of low (or no) profits.
