The Employee Retention Tax Credit (ERTC) is a refundable tax credit designed to help employers who have been affected by the COVID-19 pandemic. The ERTC can be claimed for eligible wages that were paid from March 13, 2020 through December 31, 2021.
Eligible employers must meet certain requirements in order to qualify for the ERTC, including having experienced full or partial business operations suspension due to governmental orders related to COVID-19 or having experienced a significant decline in gross receipts year over year. Additionally, the employer must be able to provide evidence of qualifying wages and associated health plan expenses paid during the period of time on which the claim is based.
Once an employer qualifies for the credit, what can they use the funds for? The ERTC funds can be used to cover eligible wages paid during the tax period, including health plan expenses. Employers can also use the funds to offset payroll taxes due, including Social Security and Medicare taxes. Additionally, employers may opt to use any remaining ERTC funds as cash refunds in their business operations or apply them toward other liabilities such as rent or mortgage payments.
In summary, employers who qualify for the Employee Retention Tax Credit can use their associated funds for a variety of purposes, including paying eligible wages and related health plan expenses, offsetting payroll taxes due, and receiving cash refunds or applying the credit towards other liabilities.