What You Should Know about the Employee Retention Credit for 2022

Author : Camputaro & Associates
Aug 01, 2022

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The Employee Retention Credit (ERC) was introduced in March of 2020 as part of the CARES Act, and economic stimulus bill meant to support individuals and businesses through the COVID-19 pandemic. But with much of business returning to normal, many business owners are uncertain of whether or not the ERC is still applicable for 2022. Keep reading to learn more about the ERC and whether or not your business may still qualify to file a claim this year.

What Is the ERC?

Before we discuss whether or not you can still file an ERC claim, let’s talk about what, exactly, the Employee Retention Credit is. The ERC is a refundable payroll tax credit that rewards employers for retaining employees, despite COVID-19’s impacts on their businesses. By keeping employees on the payroll and collecting paychecks during the downturn in business, companies can claim a credit that’s equal to a percentage of qualified wages paid to employees, as well as some health insurance costs.

The exact percentage has varied since the implementation of the ERC, and were as follows:

  • March 12, 2020—December 31, 2020: Refundable tax credit against 50% of qualified wages paid, with a max of $10,000 per eligible employee annually.
  • January 1, 2021—June 30, 2021: Refundable credit against 70% of qualified wages paid, with a credit of $10,000 per employee per quarter.
  • June 30, 2021—January 1, 2022: Refundable credit up to 70% of qualified employee wages, with a maximum credit of $7,000 per employee per quarter.

How Long Did the ERC Last?

The initial ERC, as established through the CARES Act, was slated to last through 2020. It was extended via the Consolidated Appropriations Act to last through the first half of 2021, and the American Rescue Plan extended it an additional quarter. The ERC was sunset on September 30, 2021. However, some businesses may still be able to file claims for the remainder of 2022.

Who Qualifies for the Credit?

Generally speaking, the ERC is available to almost all private-sector employers who experienced a severe impact to their business during COVID-19, or who had to partially or fully suspend operations due to pandemic restrictions. Universities/colleges, hospitals, and 501(c) organizations are also eligible.

To formally qualify, an employer must have operated their business during the dates listed above and experienced an interruption of operations during those periods due to pandemic restrictions. Employers can calculate their gross receipts in each quarter as compared to prior years and, if gross receipts in a quarter are below 50% of gross receipts in the same quarter of 2019, that employer would qualify unless their gross receipts for the next quarter exceeded 80% of the same quarter from 2019.

It’s also worth noting that, though the initial ERC could not be claimed if you received PPP loan, all eligible employers can now obtain both the ERC and a PPP loan. If you did not claim the ERC during quarters in which you qualified because you believed your PPP loan excluded you, you can claim the ERC retroactively by filing Form 941-X (Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund).

Can You Still Receive the Tax Credit?

Now that we better understand the qualifications and the amounts you could have received in each quarter, let’s address receiving a tax credit in 2022. First, it’s important to note that you cannot receive any new credits for this year; rather, you can simply claim a credit from past years this year if you did not receive one.

You can claim an ERC for wages paid between June 30, 2021, and December 31, 2021, by filing a quarterly tax return for either of those two quarters. You can claim the ERC for quarters prior to this by filling out an applicable adjusted employment tax return by the appropriate deadlines.

If you have further questions about receiving an ERC for past years, please contact Camputaro & Associates today. We can help you to determine if you qualify and get the right documents filed for you so that you receive the credits you deserve. It’s important to do this soon, as the window for claiming these credits may soon be closing. Call now to schedule a consultation with one of our experienced CPAs, and get started on claiming these refundable tax credits for your business.

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Ormond Beach, FL 32174
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