The deadlines for getting the Employee Retention Credit in 2023 are coming up fast.
As the owner of a small business, you can use the Employee Retention Credit (ERC) to help your business recover from the COVID-19 outbreak. But important deadlines are coming up quickly, so it’s important to keep up with the requirements and know how to claim the credit properly.
In this blog post, we’ll explain how to claim the ERC in 2023, including when the dates are, who is eligible, how to figure out the credit, how to file for it, and how to track your ERC money. We’ll also show you how to avoid making common mistakes and give you tips on how to keep track of and record the credit. This post will tell you the most up-to-date information about the ERC and how to properly apply for it before the deadline in 2023.
How the Employee Retention Credit works
The Employee Retention Credit was made part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed in March 2020 and is a $2.2 trillion economic boost bill. The main goal of the CARES Act was to help American workers and business owners with their finances.
It’s important to know that the ERC is a refunded payroll tax credit, not a loan that needs to be paid back. It is meant to help companies that lost money because of the COVID-19 pandemic. Even more specifically, it was made to help small employers who were qualified pay their employees’ wages and keep them on the job during the hard times of the pandemic.
As part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, the Employee Retention Tax Credit was extended for the first two calendar quarters of 2021. The tax credit that could be paid back was then extended again in 2021.
Learn about the ERC filing deadlines for 2023
Even though the tax credit ended in September 2021, qualified businesses, companies, and employers can still file papers and get claims for the Employee Retention Credit in 2023. To do this, business owners need to file IRS Form 941-X, which is used to make changes to Forms 941 that have already been filed. But they can only do this up to three years after they filed their payroll tax returns the first time.
According to the IRS, Forms 941 for a calendar year are considered filed on April 15 of the following year if they are sent in before that date. So, the Internal Revenue Service needs to get Forms 941-X for qualifying quarters in 2020 by April 15, 2024. In the same way, if you want to get ERC money for qualifying quarters in 2021, you have to send in your paperwork by April 15, 2025.
Coming dates for filing with the ERC
Employers who are eligible and want to get ERC funds for Q2, Q3, or Q4 of 2020 must turn in their 941-X by April 15, 2024.
Employers who are eligible and want to get ERC funds for Q1, Q2, or Q3 of 2021 must turn in their 941-X by April 15, 2025.
What you need to do to be eligible for the Employee Retention Credit
Employers must meet two main standards to be eligible for the tax credit. The first is a big drop in gross receipts, or total revenue, before any costs or bills are taken out. Most of the time, a person’s eligibility is based on statistics from 2019, since that was before the COVID-19 pandemic and lockdown, which started officially in March 2020. You may have heard something different, but businesses that took out Paycheck Protection Program (PPP) loans can still get the credit.
Employers whose businesses have seen a big drop in sales
The Employee Retention Credit may be given to businesses that had either of the following things happen:
Quarterly sales in 2020 have to be at least 50 percent lower than the same quarter in 2019.
Quarterly sales in 2021 must be at least 20% lower than they were in the same quarter in 2019.
Employers whose business was completely or partially shut down because of orders from the government
Businesses with a small number of eligible workers could qualify for the ERC, whether the company, business, or shop had to stop because of a government shutdown order or could stay open because it was only a partial shutdown. To be qualified in 2021, a company must meet one of the following conditions:
Government limits on work, travel, business, and meetings have stopped or slowed down operations.
The gross sales of your business are at least 20% less than they were in the same quarter of 2019.
Recovery companies that are just getting started can also get the tax credit. A business that started up after February 15, 2020 and has gross sales of less than $1 million per year is called a healing startup business. A man and a woman work as shop workers with a laptop in an indoor potted plant store.
How to figure out the credit for keeping employees
The Employee Retention Credit tool is easy for firms with a lot of experience, but it can take a long time because you need to know a lot about the ERC calculation rules.
Figuring out Gross Sales
To get a tax refund based on a drop in gross receipts, the gross receipts for a given quarter in 2020 or 2021 must be compared to the same quarter in 2019 to see how big the drop is.
If an employer’s gross sales for any calendar quarter in 2020 were less than 50% of what they were for the same quarter in 2019, they might be qualified for the ERC. In 2021, the goal is a little bit easier to reach. A business can get the ERC if its gross sales are less than 80 percent of what they were in the same quarter in 2019.
Please Read This
This is a payroll tax credit, which means that workers who qualify can get money back for taxes they have already paid. You could still get a tax credit for your federal employment taxes even if your business paid little or no income taxes. All in all, this payroll tax credit, which is based on the amount of qualified wages given, could help small businesses in a big way and encourage them to keep their employees on the payroll.
How to Apply for the 2023 ERC
Employers who are eligible must first find out if they are eligible and make sure they meet the IRS requirements. If they don’t do that, their papers won’t be accepted. Once you know for sure that you qualify for the Employee Retention Credit, you can move forward and file for it.
At first, businesses could get the Employee Retention Credit by sending in Form 941 with their quarterly tax payments. But the Employee Retention Credit could no longer be used after September 30, 2021. Employers can still file for the ERC in 2023, which is good news.
Employers can change forms they’ve already sent in by filling out and sending in Form 941-X. This lets them claim the Employee Retention Credit backdated. As we’ve already said, this can be done up to three years after the original tax forms were sent in.
How to Follow Your ERC in the Year 2023
You can call the IRS to find out how your tax return is going, but the hotline to talk to an IRS worker is usually busy and the wait time is long. This can not only be a pain, but it can also take a lot of time.
So, what is a good way to find out where your return is? As part of the “white-glove” service that StenTam gives to its clients, we can call the IRS on your behalf to keep track of your filing. This saves you time and gives you the devoted customer service you deserve. Fill out this simple 7-question form to find out more about the services we offer.
The end and what to do next
The Employee Retention Credit helped small businesses a lot during the COVID-19 outbreak, which is still going on. Small business owners can make sure they can claim the credit and get the money they need by making sure they know the deadlines for 2023, who is eligible, and how to figure and file for the credit. But the process for getting the credit can be complicated and hard to understand.
If you need more help understanding the Employee Retention Credit or how to claim it in 2023, please don’t hesitate to contact one of ERC Together’s experienced experts. They can answer your questions and point you in the right direction to make sure you get the credit right and before the deadline.