By filing Form 941, your business could receive up to $5,000 per employee under the CARES Act.
If filing IRS Form 941 hasn’t always been the highlight of your quarter, now it could make you money! Unemployment has been a major symptom of the fight against COVID-19 in the U.S. Recently, the unemployment rate reached a peak of 14.7%. Now, under the CARES Act, the government is encouraging employers to keep everybody on payroll with Employee Retention Credit.
Everything from selling lattes to running board meetings has reconfigured to protect against COVID-19. Incredible efforts and huge sacrifices have been made, but pulling down the virus’s curve has also put some weight on the economy. If you’re struggling to avoid layoffs, tax relief could be the answer.
What is Employee Retention Credit?
Employee Retention Credit provides refundable tax credits that employers can receive for each eligible employee on their payroll. As an employer, you can use this tax relief against employment taxes. These credits can equal up to 50 percent of the wages you paid your employees between March 12, 2020, and January 1, 2021. The CARES Act will grant employers up to $5,000 in tax credit per employee for the 2020 tax year.
Am I eligible?
If your business has fully or partially shut down due to COVID-19 or the regulations that have come with it, this tax relief is for you.
Your business is also eligible if it has suffered a 50 percent dropoff in gross receipts from last year. You can tell if this is you by contrasting the numbers from a 2020 calendar quarter with the same quarter in 2019.
All types of employers, including nonprofits, who have kept employees on board in spite of economic hardship are eligible.
Which employees are eligible?
The number of people you employ changes the tax relief that is available to your business.
If you have 100 or fewer full-time employees, they are all eligible, and you can receive tax credit for up to 50 percent of their qualified wages.
If your business has more than 100 full-time employees, only the qualified wages of employees who are facing furlough or have experienced reduced hours due to COVID-19 can be considered for tax credit. For this portion of your employees, you can receive up to 50% of qualified wages in retention credit.
How much tax relief will my business get?
This Employee Retention Credit is determined by the wages of the employees that are eligible. Your credit is calculated by 50 percent of the qualified wages you pay these employees, as well as the cost of some healthcare plans. The credit you’ll end up with depends on how much you pay employees, so those numbers will vary. Before you give everyone a raise, $10,000 is the cap on those qualifying wages. At most, you could receive $5,000 per employee.
How Do I Claim These Tax Credits?
Claim your tax credit by filing Form 941. This form reports your total qualified wages and health insurance expenses to the IRS.
Even once your business is financially thriving and back to working at full capacity, you are required to file this employment tax return every quarter. Express E-file makes Form 941 an easy part of running a healthy and efficient business, and for right now, it can get you the tax relief you need.
If you need these tax credits sooner, you can file Form 7200. This form asks for an advance on tax credits for employee retention credit, qualifying employee sick leave, and family leave. When you file Form 941, you can easily report the credits you received. We get that you’re busy, but Form 7200 takes under 2 minutes.
Click here to find Form 941 instructions! Stay up to date on the penalties for forgetting to file, why e-filing could be better for you, and the latest on keeping your business on top.
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