The Employee Retention Credit (ERTC) under the CARES Act encourages businesses to keep their employees on payroll. This refundable credit can be requested for qualifying salaries, including certain health insurance costs, paid to employees. Companies can apply for the credit if their employees are unable to work due to government orders or a significant drop in gross revenues. Employer U has the right to treat 80 percent of the wages paid as qualified wages and to request an Employee Retention Credit for 80 percent of the salary paid. However, payments made to a former employee after the termination of the employment relationship are not considered qualifying wages.
Similarly, amounts paid to authorized real estate agents of real estate brokerage firm Y do not constitute wages and are not eligible for the ERTC. Employer R continued to pay normal employee salaries throughout a quarter, even though their employees were unable to provide services during the first part of it. The IRS has protective measures in place to prevent wage increases from being counted for the credit once the employer is eligible to receive it. Additionally, customers who have applied for a PPP loan and will be forgiven for it can now be eligible for the ERTC with certain salaries. Companies can no longer pay salaries to apply for the Employee Retention Tax Credit, but they have until 2024 and, in some cases, 2025, to analyze their payrolls during the pandemic and apply for the credit retroactively by filing an amended tax return. Qualified wages are calculated without regard to federal taxes imposed or withheld, including employee or employer's share of social security taxes, employee and employer's share of Medicare taxes, and federal income taxes that must be withheld. Schedule a free consultation on the ERTC to see how much of it your company qualifies for.
The minister's salary and stewardship allowance do not constitute salaries and are not eligible for the ERTC. Because employees' working hours have not changed, none of the wages that Employer W pays employees is qualifying wages. If the majority owner of a company does not have any brothers or sisters (all or mixed-race), grandparents or direct descendants, their spouse's salary is eligible to receive the Employee Retention Credit.
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