The employee retention credit refunds employee wages not covered by PPP loans for eligible businesses for up to 70% of wages in 2021 and 50% of wages in 2020. The credit can be applied to up to $10,000 in earnings for each employee annually in 2020 and per quarter in 2021. As a self-employed person your wages are eligible if you are paid wages (for example, if you are an S-Corp and receive a paycheck).You can amend your quarterly employer's tax return (form 941) for past quarters to claim these credits.
Your business must be eligible meaning it was affected by a governmental order restricting business or suffered income losses meeting certain guidelines. Talk to your payroll processor, or contact your accountant to find out if you are eligible for these very valuable credits. You can literally receive thousands of dollars back from the IRS for these credits.
For example, in 2021 if you paid an employee $10,000 in a quarter and your business is eligible, you could receive $7,000 back from the IRS (minus taxes due) just for that one employee.
The credit is not available for 2021 fourth quarter 941s, but you can amend your previous quarters to claim the credit. Small businesses were shocked to see a suspension of the last quarter of the Employee Retention Credit program tucked into the recently passed Infrastructure and Jobs Act. The law retroactively repeals an employer's ability to claim employee retention credits for eligible wages paid after Sept. 30, 2021 -- effectively eliminating the fourth quarter of 2021.
Thankfully, U.S. Representatives Terri Sewell, Carol Miller, Stephanie Murphy, and Kevin Hern recently introduced bipartisan legislation, the Employee Retention Tax Credit Reinstatement Act (H.R. 6161), to restore the ERC for the full 2021 calendar year as intended. Add your voice in support of this needed remedy. Take Action Today