Employee retention tax credit papers and folder.

Of all the business financially impacted by the COVID-19 pandemic over the past two years, building service contractors (BSCs) certainly fall into the category. While no government program will likely be able to fully make up the profits lost by facility shutdowns and overall loss of business, there’s one program in place that can help to provide some relief. 

As reported by Go Banking Rates, small businesses can still file for the Employee Retention Tax Credit  — or just Employee Retention Credit (ERC) — despite an initial deadline for the program being set back on October 2, 2021. The program, which was established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), provides an incentive for small business to maintain employees on payroll.

How It Works

In the initial stages of the ERC set earlier in the pandemic, the tax credit business could receive 50 percent of $10,000 in earned wages for every employee deemed eligible on a payroll impacted by the pandemic. In 2021, however, this figure jumped up to 70 percent. The payments were given out on a quarterly basis for each eligible employee. As an example from Go Banking Rates, this means that $10,000 of wages for one employee in 2021 could get $7,000 back in credit per quarter, totaling out to potentially $28,000 annually for each employee. In instances where the tax credit total exceeds an employer’s share of payroll taxes owed for a quarter, the employee would be refunded the excess according to the Treasury. 

How To Get The ERC

In order to be eligible for the ERC, an employee must fill out a quarterly payroll tax return form (Form 941)  in order to monetize credit for each payroll period. So, for example, a business that pays $100,000 accumulatively for payroll will likely receive a $70,000 credit return. While the aforementioned deadline to receive the ERC was last October, business can retroactively apply by filling out a Claim For Refund Form, also known as an Adjusted Employer’s Quarterly Federal Tax Return (941-X). From there the deadline would be after three years of the initial tax filing as eligibility is based on records from 2019. Specific parameters to be eligible include:

  • A business must have had 500 or fewer employees in 2019
  • Gross receipts in 2020 or 2021 must be at least 20 percent lower per-quarter compared to the same quarter initially listed from 2019

 

Additionally, businesses that have 100 or fewer full-time employees may be eligible for a 100 percent employee wage credit. Businesses that weren’t given a shutdown order may still be able to receive this benefit. 

In related news, check out this recent CleanLink piece on employee retention tips.