The Employee Retention Tax Credit: What Booksellers Need to Know

Businesses that have taken out a Paycheck Protection Program (PPP) loan are now eligible for the Employee Retention Tax Credit (ERTC), which was originally permitted in 2020 by the CARES Act. Detailed information on the credit, especially relevant for bookshops, is provided below.

Talk to your payroll service and accountant as soon as possible if you believe your company may qualify for the ERTC in 2020 and/or 2021.

The Employee Retention Tax Credit (ERTC) helps companies keep good employees.

To help companies maintain a stable workforce as the pandemic spreads, the government has created the Employee Retention Tax Credit. To help offset some of the costs associated with compensating employees for lost time while their company dealt with the effects of COVID-19, the IRS is offering a refundable tax credit for wages given to qualifying workers. The most recent relief law extended the credit through December 31, 2021.

Can I join the ERTC with my store?

The credit is available to companies that meet one of two criteria: (1) the company was completely or partially shut down as a result of a government order; or (2) the company saw a decrease in quarterly gross receipts of more than 20% (formerly 50%).

Starting July 1, 2021, start-up enterprises founded after February 15, 2020, with yearly gross receipts of up to $1 million will also be entitled to claim the credit.

If the PPP loan was used to pay for payroll expenses, the business can now also apply for the ERTC. (Wages paid in PPP currency are ineligible for the ERTC.) The same holds true for earnings earned under the tax credit for paid sick and family leave provided by the Families First Coronavirus Response Act (FFCRA). (The ERTC is not available for wages received with funds from the Fair Labor Standards Act.)

Talk to your payroll service and/or tax preparer if you have any queries regarding your eligibility.

Where can I find out the ERTC cost?

Similar to the previous adjustments to who is now qualified to get the tax credit, the amount has also been adjusted upward.

Credit equal to 50% of eligible salaries up to $10,000 for the year (maximum $5,000 per employee) for wages paid between March 12, 2020 and January 1, 2021.

The credit is 70% of eligible wages up to $10,000 per quarter (a maximum of $28,000 per employee) for wages paid between January 1, 2021 and January 1, 2022. Effective July 1, 2021, qualified new enterprises will be eligible to receive up to $50,000 per quarter.

The definition of eligible earnings.

Salaries paid to employees, whether or not they were working (furloughed and working employees’ pay both count), are considered qualified wages for enterprises with 500 or fewer full-time employees (formerly 100 or fewer).

Wages paid to employees who are not actively working are now considered qualified wages for companies with more than 500 full-time employees (previously more than 100).

With effect from the first day of July 2021, all wages paid to employees (working or not working), regardless of the number of full-time employees, will be considered qualified wages for “severely financially distressed” businesses, defined as businesses that experienced a decline in gross receipts of more than 90 percent compared to the same quarter in 2019.

Costs associated with a group health plan paid for by an employer might be included in a worker’s salary. Get in touch with your payroll service and/or accountant if you have particular inquiries concerning reimbursable wages.

Where do I go from here to get my ERTC?

There will be a reduction in the payroll tax liability for companies who take advantage of this credit. Given that the credit is refundable, any excess over the business’ payroll tax liability will be returned to it.

When filing their quarterly employment tax returns, businesses can use Form 941 to disclose employee wages. Using IRS Form 7200, companies can request an advance payment from the IRS if their employment tax deposits fall short of covering the credit.

Talk to your payroll service and accountant as soon as possible if you believe your company may qualify for the ERTC in 2020 and/or 2021.

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