Employee Retention Tax Credit: How It Can Help Your Business Stay Competitive Amidst COVID-19

The COVID-19 pandemic has posed unusual challenges to businesses across the globe, and employee retention has become a critical issue for many. The Employee Retention Tax Credit (ERTC) has emerged as a crucial lifeline for businesses struggling to retain their employees amidst economic uncertainty.

But, beyond its practical benefits, the ERTC has broader implications for businesses' competitive edge. A high employee turnover rate can severely impact a company's bottom line, from decreased productivity and increased recruitment costs to a tarnished reputation and loss of talent. By contrast, retaining employees can enhance a business's productivity, innovation, and overall performance.

In this post, you will understand the Employee Retention Tax Credit updates and developments and how you can keep your business competitive with this.

What is the ERTC (Employee Retention Tax Credit)?

The ERTC (Employee Retention Tax Credit) is a tax credit that incentivizes businesses to retain their employees during the COVID-19 pandemic. It provides a refundable tax credit of up to $7,000 per employee per quarter, and it can be claimed by eligible employers against their share of Social Security tax. To be eligible for the credit, businesses must meet specific criteria, including having experienced a significant decline in gross receipts or fully or partially suspending operations due to a government order.

Latest Developments and Updates

The ERTC has undergone several developments and updates since its introduction. In December 2020, the Consolidated Appropriations Act extended the ERTC through June 30, 2021, and increased the credit rate from 50% to 70% of qualified wages. The American Rescue Plan Act further extended the ERTC through December 31, 2021, and expanded eligibility for the credit to include start-up companies and certain government entities.

The latest development regarding the ERTC is the IIJA (Infrastructure Investment and Jobs Act), enacted by President Joe Biden in November 2021. This act further expands the ERTC and extends it through December 31, 2022. The Infrastructure Investment and Jobs Act increases the credit rate from 70% to 75% of qualified wages and increases the limit on qualified wages from $10,000 per quarter to $12,000 per quarter, effectively increasing the maximum credit from $7,000 per employee per quarter to $9,000 per employee per quarter.

Additionally, the Infrastructure Investment and Jobs Act introduces a new category of eligible employers called recovery start-up businesses. These businesses began operations after February 15, 2020, and have annual gross receipts of $1 million or less. These businesses can claim the credit on all wages paid to employees during the period they are considered a recovery start-up business, up to a maximum of $50,000 per quarter.

How ERTC Can Help Your Business

The ERTC can help your business in several ways. By providing a tax credit for retaining employees, the ERTC can reduce the financial strain on your business and allow you to keep your employees on board. This can help maintain productivity, minimize recruitment and training costs, and keep your business competitive.

Furthermore, the expanded eligibility criteria and increased credit rates and limits under the Infrastructure Investment and Jobs Act make the ERTC even more beneficial for businesses. Recovery start-up businesses can now also take advantage of the credit, and the increased credit rates and limits mean that businesses can claim a higher maximum credit per employee per quarter.

Conclusion

The ERTC is a valuable tool for businesses seeking to retain employees during the COVID-19 pandemic. With the latest developments and Employee Retention Tax Credit Update under the Infrastructure Investment and Jobs Act, the ERTC has become even more beneficial for businesses of all sizes. If you're a business owner struggling with employee retention, it's worth exploring whether you're eligible for the ERTC (Employee Retention Tax Credit) and how it can help your business stay competitive in these challenging times.