Technically, yes, but only qualifying salaries are paid while mandates are in effect and have a more than nominal impact on the business. While an employer may not 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 entitled to apply for the employee retention credit. See SHRM Online Articles House Passes Infrastructure Bill With Workplace Provisions And After Employee Retention Credits Revocation, Next Steps The CARES Act Employee Retention Credit Encourages Companies To Keep Employees On Their Payroll. However, if you pay employees to work and not work, the wages you pay employees for not working qualify for this credit.
You must report your qualifying wages and related credits for each calendar quarter in which you qualify for the credit on Form 941-X, Employer's Adjusted Quarterly Federal Tax Return or Request for Reimbursement, as applicable. ERC credits are calculated based on eligible wages paid to employees during eligible employer status. The credit was allowed against the employer's share of social security taxes (6.2 per cent rate) and the railroad retirement tax on all wages and compensation paid to all employees during the quarter. The employer could withhold federal income tax withheld from employees, the employee's share of social security and Medicare taxes, and the employer's share of social security and Medicare taxes with respect to all employees.
For most companies that take advantage of this program, refundable tax credits far exceed payroll taxes paid by employers. 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. The credit is deducted from the employer's share of the Social Security tax, but the excess is refundable according to normal procedures. 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.
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. An eligible employer could reduce their employment tax deposits during the quarter by the amount of credit anticipated for the quarter. The employee withholding credit is a fully refundable tax credit that eligible employers claim against certain labor taxes.
Eligible employers will report their total qualifying wages and related health insurance costs for each quarter on their employment tax returns (usually Form 941, Employer's Quarterly Federal Tax Return) during the applicable period. .