Technically, yes, but you only pay qualifying salaries while mandates are in effect and have a more than nominal impact on the business. While an employer cannot include salaries financed by a PPP loan in the ERC calculation, PPP funds only apply to eight to ten weeks of salary expenses. ERC eligibility periods are longer. PPP loans can also finance non-wage expenses.
The Employee Retention Credit is available to churches and other faith-based organizations that were affected by government-mandated capacity restrictions for meetings or experienced significant decreases in gross income. Employers who use a PEO are still eligible to apply for the Employee Retention Credit. The new guide is not so favorable for salaries paid to those who own more than 50% of a business. In general, anyone related to an owner of more than -50% by blood or by marriage cannot be included in the ERC.
Constructive property rules also apply when determining who is an owner of more than -50%. However, the rules do not directly disqualify the owner of the ERC unless the rules of constructive ownership are examined broadly. The notification did just that and concluded that the owner cannot be included in the ERC if that person has a living sibling, spouse, ancestor or lineal descendant (because that living member of the family will constructively own more than 50% of the business and the legal owner will be related to the building owner). Therefore, wages paid to any person in the family of an owner of more than -50%, including the owner, will generally be disqualified from the calculation of the ERC.
For the purposes of the employee retention credit, a portion of an employer's business is considered more than a nominal share of the operations if the gross income of that portion of the business operations is not less than 10 per cent of the gross revenue (determined by the same calendar quarter in 201 or hours of service performed by the employee is that the share of the company is not less than 10% of the total number of hours of service performed by all employees in the employer's company. The notice confirmed that tips received by employees count as “qualified wages” for employers who calculate the amounts. Instead, the employer must reduce the deductions from wages on your income tax return for the tax year in which you are an eligible employer for ERC purposes. The IRS has security barriers in place to prevent salary increases that would count toward the credit once the employer is eligible for the employee retention credit.
If the employment tax deposits withheld were not enough to cover the amount of the advance credit, the employer may file Form 7200 (Advance Payment of Employer Credits Due to COVID-19) to request prepayment of the remaining amount of the credit. For more information on the employee retention credit, visit the Cherry Bekaert ERC Guidance Center or contact Martin Karamon. The credit applies to your share of the employee's Social Security taxes and is fully refundable. Due to the complexities of eligibility for the employee retention credit, Thomson Reuters has updated the Employee Retention Credit Tool to help all employers discover their eligibility for the credit.
An eligible employer could reduce their employment tax deposits during the quarter by the amount of credit anticipated for the quarter. Those who have more than 100 full-time employees can only use the qualified salaries of employees who do not provide services due to the suspension or decline of business. Employers reported total qualified wages and employee retention credit related to COVID-19 on Form 941 for the quarter in which qualified wages were paid. Employers who file an annual payroll tax return can file an amended return using Form 944-X (Employer's Adjusted Annual Federal Tax Return or Request for Refund) or Form 943-X (Employer's Adjusted Annual Federal Tax Return for Employees or request for reimbursement) to claim the credits.
Employers with 100 or fewer full-time employees can use all salaries of employees, those who work, as well as any paid time that is not working, with the exception of paid leave provided for in the Families First Coronavirus Response Act. The ERTC is a refundable credit that businesses can claim for qualified wages, including certain health insurance costs, paid to employees. The employee withholding credit is a fully refundable tax credit that eligible employers claim against certain labor taxes. The CARES Act Employee Retention Credit Encourages Companies to Keep Employees on Their Payroll.