The Coronavirus Aid, Relief and Economic Security Act (CARES) created the Employee Retention Credit (ERC) to help companies keep their employees on the payroll. Employers who are eligible for the credit can receive benefits for each quarter they keep their employees on the payroll. To apply for the credit, employers must file an amended return using Form 944-X (employer's adjusted annual federal tax return or request for reimbursement) or Form 943-X (adjusted federal employer tax return for agricultural employees or request for reimbursement).The credit is allowed against the employer's share of social security taxes (6.2% rate) and the railroad retirement tax on all salaries and compensation paid to all employees during the quarter. Eligible employers will declare their total qualified wages for the purpose of the employee retention credit for each calendar quarter on their federal employment tax returns, usually Form 941, the employer's quarterly federal tax return.
If the amount of the credit exceeded the employer's share of those federal payroll taxes, the excess was treated as an overpayment and was reimbursed to the employer. In addition to declaring their employee retention credit on their payroll tax return, employers must also declare any qualifying wages for sick leave and qualifying family leave for which they are entitled to a credit under the FFCRA on Form 941. If the withheld payroll tax deposits were not sufficient to cover the expected credit amount, employers can file Form 7200 (prepayment of employer credits due to COVID-19) to request prepayment of the remaining amount of credit. When filing Form 7200, employers must include in the form their name and EIN as well as the name and EIN of any third-party payer they use to file their payroll tax returns (such as Form 94). Employers must also be aware that a portion of their business is considered greater than a nominal share of operations if either its gross revenues or hours of service performed by employees are not less than 10% of total gross revenues or total hours of service performed by all employees of their company. ERC Today is an employee retention credit service that helps companies assess their eligibility, complete a thorough analysis of their applications, provides guidance on the application process and documentation, provides specific experience in programs that a regular CPA or payroll processor might not know well, and executes a quick and simple process from start to finish, from eligibility to applying to and receiving refunds. Aprio also works with other credits to increase companies' liquidity. The ERC is a valuable tax relief measure for both employers and employees, and can help retain key staff during these difficult times. And the longer you keep your employees on the payroll, the more benefits you're entitled to receive.