Employee Retention Credit: Is It Refundable?

The Employee Retention Credit (ERTC) is a refundable tax credit that companies can request on qualifying salaries, including certain health insurance costs, paid to employees. It is recommended that businesses submit their employee withholding tax refund documentation to the IRS as soon as possible. However, due to numerous delays, companies should not expect a refund of the employee retention credit any time soon. To determine the maximum amount of an eligible employer's employee retention credit, it is important to understand that companies can no longer pay salaries to apply for the credit.

However, 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. The employee retention credit is a fully refundable tax credit for employers that is equivalent to 50 percent of qualified wages (including allocable qualified health plan expenses) that eligible employers pay to their employees. When speaking with an IRS agent, it is important to explain that you are inquiring about the status of your employee retention credit and if you have completed your 941-X (amended returns) for all relevant quarters. Business owners want to know the status of their employee retention tax credit refund and keep up to date with the process.

To find out how much of the employee retention tax credit your company qualifies for, it is recommended to schedule a free consultation. The IRS has protective measures in place to prevent wage increases from being counted for the credit once the employer is eligible to receive the employee retention tax 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 repayment schedule for the employee retention credit is such that the IRS originally planned to grant a refund between six weeks and six months after an updated payroll report was submitted.

This law increased the employee limit to 500 to determine what salaries are applicable to the credit. Additionally, customers who have applied for a PPP loan and will be forgiven for it may now be eligible for the employee retention credit with certain salaries.