What is the Employee Retention Tax Credit?
by Marcel Abandonato
Last year, Congress created a large tax break, the Employee Retention Tax Credit (ERTC), to provide additional relief to businesses hard-hit by the pandemic:
- Originally created as part of the March 2020 CARES Act, the 2020 tax break gave eligible businesses a refundable tax credit of 50% of up to $10,000 in qualified wages paid per employee in 2020.
- The ERTC was expanded even further in March, when the American Rescue Plan Act was signed into law. Now more businesses are potentially eligible, and the deadline for claiming credit has been extended through December 31, 2021 (the ERTC was previously set to expire on June 30, 2021).
Why was the Employee Retention Credit (ERC) created?
The Employee Retention Credit (ERC) was designed to encourage employers to keep employees on their payroll. The refundable tax credit is up to $23,000 for each qualified employee. This credit is 70% of qualified wages paid to an employee by an eligible employer experiencing economic hardship related to COVID-19.
The ERTC is also a REFUNDABLE tax credit.
Most tax credits are non-refundable but offer a 20-year carry-forward. Since the ERTC is a refundable tax credit, eligible employers will receive a check directly from the IRS for the refund.
How can your staffing firm take advantage of the ERTC?
With more than 16 years of experience serving the staffing industry, MJA & Associates can help:
- determine your eligibility for the ERTC
- calculate your tax credits
- ensure compliance with ERTC guidelines (e.g., ensure that there is no double-dipping with other tax credits)
MJA & Associates has already helped nearly 50 staffing clients with the ERTC and they are seeing significant results. Here are just a few examples:
- Staffing Firm in California earned $1.4 million
- Staffing Firm in Michigan earned $1.2 million
- Staffing Firm in North Carolina earned $681k
- Staffing Firm in Florida earned $640k
Several of these companies did not think they would be eligible for the ERTC but were surprised to learn they qualified. It’s worth taking the time to determine if your company is eligible. The ERTC has already seen multiple revisions, so it’s quite possible businesses may now qualify.