For the last nearly year and a half, the world has been struggling to deal with the Covid-19 pandemic that just doesn’t want to let go. Many small businesses have been forced to close their doors, shattering the dreams of once-prosperous business owners and forcing thousands of former employees into the world of unemployment. It seems that there is no segment of business or country that has escaped the wrath of Coronavirus.

With the knowledge that so many companies were struggling to pay their bills and employees due to pandemic restrictions such as forced shutdowns and capacity restrictions. The federal government worked to pass several pieces of legislation in the name of Coronavirus aid for small businesses. In addition to PPP and loan forgiveness, the Employee Retention Credit (ERC) program was introduced in 2020.

ERC is aimed at giving companies of fewer than 500 full-time or full-time equivalent (FTE) employees credit in the form of lowered quarterly employment tax deposits or credit advances from the IRS on qualifying expenditures. Employee wages and money that a company pays pre-tax towards an employee’s health plan are examples of such qualifying expenses.

The rules of the ERC state that companies that meet the qualifications for pandemic-related hardships due to loss of revenue can claim 70% credit up to $10,000 for each employee each qualifying quarter. If you quickly do the math, this means that a company can get up to $7,000 per employee every quarter for a maximum amount of $28,000 annually. That is a very helpful chunk of change.

With the ERC program, one of the most frequently asked questions is if it has to be paid back. The good news is that this answer is no. The ERC is considered a credit and not a loan. Employers are required to withhold a certain amount of employment taxes every pay period for every employee. These withheld wages are qualified wages that count towards the ERC calculation.

These withheld wages are then paid by the employer to both the federal unemployment tax (FUTA) and Social Security taxes. The Employee Retention Credit program, along with other tax credits were put into place by the government to allow small businesses to be able to hold onto some of the money they would have had to pay to FUTA and Social Security by lowering the rate they were taxed at. In addition, if an employer is eligible for a greater tax credit than what they paid out, they can get a check sent to them for the difference.

While the reduced tax bill gives immediate liquidity to a small business’ cash flow, operations that are requesting a payment from the IRS for additional credit money can expect to wait 3-4 months at times for the credit payment to be sent.

At Seek Business Capital, we know the intricacies of applying for and receiving tax credits such as ERC for small businesses. Don’t wait any longer to get the cash relief you need and deserve for your small business. Pick up the phone and call our team today!