The employee retention credit is a fully refundable tax credit that eligible employers request to cover certain payroll taxes. It's not a loan and doesn't have to be repaid. For most taxpayers, the refundable credit exceeds the payroll taxes paid in a credit-generating period. The ERTC is a refundable credit that companies can request on qualifying salaries, including certain health insurance costs, paid to employees.
While the Employee Retention Tax Credit (ERTC) program has officially expired, this does not affect a company's ability to apply for the ERTC retroactively. People who have more than 100 full-time employees can only use the qualified salaries of employees who do not provide services due to the suspension or decline of business activity. Instead, pay deposits in the required amount without calculating the employee retention credit. The IRS has protective measures to prevent wage increases from being counted for the credit once the employer is eligible to receive the employee retention tax credit.
This law increased the employee limit to 500 to determine what salaries are applicable to the credit. Employers with 100 or fewer full-time employees can use all the salaries of employees who work, as well as any paid time that they are not working, with the exception of paid vacation provided under the Families First Coronavirus Response Act. The notice includes guidance on how employers who received a PPP loan can retroactively apply for the employee retention tax credit. The employee retention credit under the CARES Act encourages companies to keep employees on their payroll.
Also, remember that if a customer has applied for a PPP loan and will be forgiven for it, they can now be eligible for the employee retention credit with certain salaries. Companies can no longer pay salaries to apply for the employee retention tax credit, but they have until 2024 and, in some cases, 2025, to analyze their payrolls during the pandemic and apply for the credit retroactively by filing an amended tax return.