Employee Retention Tax Credit (ERTC): What You Need to Know in 2023

Introduction:

As businesses continue to navigate the economic challenges posed by the COVID-19 pandemic, the Employee Retention Tax Credit (ERTC) has emerged as a significant relief measure. The ERTC is designed to support employers by providing a tax credit for wages paid to employees during periods of economic disruption. In this article, we will delve into the key aspects of the ERTC, including the limit per employee, the availability of funds, qualification criteria, and the importance of avoiding ERC scams.

What is the Employee Retention Tax Credit (ERTC)?

The Employee Retention Tax Credit is a refundable tax credit introduced by the U.S. government to encourage businesses to retain their employees and help them weather the financial impact of the pandemic. The ERTC is administered by the Internal Revenue Service (IRS) and was initially established under the CARES Act in March 2020. It has since been extended and modified by subsequent legislation.

Limit Per Employee:

For the tax year 2023, the maximum credit per eligible employee is $7,000 per quarter. This means that employers can receive a tax credit of up to $7,000 for each employee who was paid wages while not working due to COVID-19 related circumstances, such as government-imposed restrictions or a significant decline in business.

Availability of Funds:

As of my knowledge cutoff in September 2021, the ERTC was an active program, providing financial assistance to eligible businesses. However, the availability of funds may vary, and it is essential to consult the official IRS website (www.irs.gov) or seek professional advice to obtain up-to-date information on the program’s status and funding availability in 2023.

Qualification for the ERTC in 2023:

To qualify for the ERTC in 2023, businesses must meet specific criteria outlined by the IRS. The key points to consider include:

1. Employer Eligibility: Employers of all sizes, including tax-exempt organizations, can qualify for the credit. However, government entities and small businesses that received Paycheck Protection Program (PPP) loans have different eligibility rules.
2. Revenue Decline Threshold: Employers must demonstrate a significant decline in gross receipts. Under the current guidelines, a decline of at least 20% compared to the corresponding quarter in 2019 is required to qualify.
3. Full or Partial Suspension: Employers must also demonstrate either a full or partial suspension of operations due to governmental orders limiting commerce, travel, or group gatherings, or they must prove a significant decline in business activity.

It is important to note that the qualification criteria and rules may evolve, and it is advisable to consult the IRS website or engage a tax professional for the most accurate and up-to-date information.

Avoiding ERTC Scams:

While the ERTC is a legitimate government program aimed at providing relief to struggling businesses, it is crucial to be aware of potential scams and fraudulent activities. Here are some tips to avoid ERTC scams:

1. Rely on Trusted Sources: Obtain information about the ERTC from reputable sources such as the IRS website, official government announcements, or authorized tax professionals. Be cautious of unsolicited emails, phone calls, or websites claiming to offer easy access to the program.
2. Be Wary of Excessive Claims: If an individual or organization promises a guaranteed ERTC refund or credits significantly larger than the specified limits, exercise caution. Scammers often lure unsuspecting businesses with exaggerated claims.
3. Verify Information: Cross-reference any information or advice received regarding the ERTC with official sources or seek assistance from licensed tax professionals. Avoid sharing sensitive information without verifying the legitimacy of the request.

Conclusion:

The Employee Retention Tax Credit remains a valuable program for businesses seeking financial assistance during the ongoing economic challenges caused by the COVID-19 pandemic. With a limit of $7,000 per employee per quarter, the ERTC can provide substantial relief. However, it is crucial to stay informed about the eligibility criteria and funding availability, relying on trusted sources such as the IRS website. Additionally, businesses must remain vigilant to avoid falling victim to ERTC scams by exercising caution, verifying information, and seeking professional guidance when necessary.