ERTC - Employee Retention Tax Credit 2022

ERTC - Employee Retention Tax Credit 2022

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The Employee Retention Credit is a refundable tax credit available to qualifying businesses equal to 50% of the qualified wages an eligible employer pays employees

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UPDATE: The Infrastructure Investment and Jobs Act that the House approved on Nov. 2021 accelerated the end of the retroactive credit date to October 1, 2021, rather than January 1, 2022. But the credit remains available to businesses to claim on amended tax returns for qualifying periods assuming they met the eligibility criteria and paid eligible wages and benefits during those times.

To apply for the Employee Retention Tax Credit, employers must complete and file Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, with their quarterly federal tax return.

What is the Employee Retention Tax Credit?

What is the Employee Retention Tax Credit?

The Employee Retention Credit is a refundable tax credit available to qualifying businesses equal to 50% of the qualified wages an eligible employer pays employees after March 12, 2020, and before January 1, 2021.

For each employee, wages (including health plan costs) up to $10,000 can be counted to determine the amount of the 50% credit. Because this credit can apply to wages already paid after March 12, 2020, many employers can access this credit by reducing upcoming deposits or requesting an advance credit on Form 7200, Advance of Employer Credits Due to COVID-19.

The Employee Retention Credit deadline was October 1, 2021. However, you can still file retroactively as long as you meet the eligibility requirements. See the update above for the current filing steps.

Who Qualifies for the Employee Retention Tax Credit?

Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business during the calendar year 2020 and have experienced one of the following situations:

  1. A full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
  2. A significant decline in gross receipts

For those unaware, a significant decline in gross receipts begins with the first quarter in which an employer's gross receipts for a calendar quarter in 2020 are less than 50% of its gross receipts for the same calendar quarter in 2019.

The significant decline in gross receipts ends on the first day of the calendar quarter, in which gross receipts are more than 80% of its gross receipts for the same calendar in 2019.

In addition, as of January 1, 2021, the definition of qualified wages was changed to provide:

  • For an employer with more than 500 full-time employees in 2019, qualified wages are those paid to employees not providing services because operations were fully or partially suspended or due to the decline in gross receipts.
  • For an employer that averaged less than 500 full-time employees in 2019, qualified wages are those paid to all employees during a period that operations were entirely or partially suspended during the quarter that the employer has a decline in gross receipts regardless of whether the employees are providing services.

What Can I Spend ERTC Money On?

What Can I Spend ERTC Money On?

The Employee Retention Credit is like a reimbursement, which means you can't spend the money on whatever you want. However, it is a fully refundable tax credit, so you only receive up to 50% of $10,000 in wages per quarter for each employee if you are eligible.

Do I have to Pay funds from an ERTC Back?

Not at all. The ERTC is a reimbursement in the form of employer credits. Think of it as a cash reward from Uncle Same for making through the last several years as a business. You don't have to pay it back.

How Long Do I Have to Wait to Receive ERTC Funds?

The IRS has previously stated that the refunds would be issued between six weeks to six months after the updated payroll reports were filed. As of late, people have reported a turnaround time of nine to twelve months.

The IRS is currently backlogged in the returns process and is completing the refunds in the order they were received. If you have any questions, you can call the IRS at 1-800-829-1040. To check on the status of a refund, call the IRS at (877)-777-4778.

The IRS has reported two leading causes of their delays:

  1. The IRS processes for dealing with COVID-19 safety requirements, including working remotely, and
  2. An overwhelming number of refund requests.

What if I Can't Wait 9-12 Months?

The IRS is doing the best it can to get to handle each request. Why not look into alternative funding while you wait for your credit from the IRS? While extending waiting periods can cause a dilemma in your business, we have a short-term solution to help. First Union Lending offers a variety of short-term and long-term business loans that can help you stay afloat while you wait for funds from the IRS.

A bridge loan may be just what you need while you wait for the IRS to get back to you.

A Bridge Loan Can Be A Your Short-Term Solution

A bridge loan is a short-term loan used by a business until another source of financing is secured or an existing obligation is removed. It allows business owners to meet current obligations by providing immediate cash flow.

Bridge loans are short-term, up to one year, have relatively high-interest rates, and are usually backed by some form of collateral such as real estate or inventory. Its purpose is to get you from “Point A” to “Point B,” acting as a bridge over the gap when financing is needed and not yet available.

It can be the perfect financial solution as you await payment from the IRS for the tax credit. Call today, fill out an online application, and we'll discuss possible financing options!

Pros of Bridge Loans

There are a few reliable pros for opting in for a bridge loan. It is a perfect financial solution for quick cash for inventory and business upgrades.

Quick Financing

The application, approval, and funding process for bridge loans differ significantly from traditional ones. Thanks to this expedited process, your business can quickly receive financing from purchasing equipment, pay for inventory, or meet payroll.

A bridge loan is especially vital if you need to complete a job or are trying to bid on additional projects. Whether it's to buy real estate or another business, bridge financing gives you a leg up on other bidders because you can close faster.

You Can Still Control Your Business

It's common for business owners waiting on cash to turn towards short-term financing through one of their equity partners. However, part of the deal they often strike is a more significant stake in the business for their partner.

Bridge loans are a short-term financing solution, so you won't need to turn to partners. In addition, you can maintain as much control of your business as possible. In this regard, this is a win!

It'll Help With Long Payment Cycles

When a healthy business runs into a cash flow problem, it's often caused by long payment cycles. For example, if you own a construction business, you might get paid at the beginning and end of a project. In the interim, you'll still need to complete the project and afford other business expenses.

To solve this problem, you could use bridge financing to gain access to cash which will cover your upfront expenses while waiting for payment.

Generally speaking, if your financial situation is shaky, it could be challenging to get a bridge loan. Lenders typically require strong credit and stable finances to be approved for a bridge loan. Lenders may set minimum credit scores and debt-to-income ratios.

First Union Lending is here to help with your ERTC

At First Union Lending, we have an unwavering belief that small and medium-sized businesses deserve the right to access the capital they need to be successful.

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Our goal is to build long-term, lasting relationships by providing business owners with what they need when they need it. We pride ourselves on being educated, knowledgeable, and caring about how we conduct business. We have voluntarily acquired much of the same licensing required by traditional banks to cement our fiduciary responsibility to our clients and work culture.

We are here to consult, help you save, and guide your business to success.

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