This law allowed some employers most affected by financial difficulties to be able to claim the credit against the qualified salaries of all their employees, rather than just those who did not provide services. Remember that the credit can only be deducted for salaries that are not forgiven or that are expected to be forgiven under the PPP. The employee retention credit under the CARES Act encourages companies to keep employees on their payroll. This law increased the employee limit to 500 to determine what salaries are applicable to the credit.
To apply for credit for previous quarters, employers must file Form 941-X, Employer's Adjusted Quarterly Federal Tax Return or Request for Refund, for the applicable quarters in which qualifying wages were paid. Leave under the FFCRA included paid sick leave and family leave, which, when taken under the provisions of the law, offered businesses the opportunity to apply for a tax credit. The ERTC is a refundable credit that companies can request on qualifying salaries, including certain health insurance costs, paid to employees. 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.
The notice includes guidance on how employers who received a PPP loan can retroactively apply for the employee retention tax credit. Employers can still apply for the ERTC retroactively by filing Form 941-X, Employer Adjusted Federal Tax Return or Request for Refund, for each quarter in which they have paid qualifying wages. 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. When determining the qualifying salaries that can be included, the employer must first determine the number of full-time employees.
Employers can file Form 941-X up to three years after the original payroll tax due date, which is normally April 15. Once the employer has a basic idea of whether they are eligible, they can determine the qualifying wages and calculate the amount of the credit. Eligible employers, including PPP beneficiaries, can apply for a credit against 70% of qualified wages paid. Most employers, including colleges, universities, hospitals and 501 (c) organizations after the enactment of the United States Rescue Plan Act, could be eligible for credit.