Many small business owners in Fort Collins may still find it difficult to access the Employee Retention Tax Credit or ERTC tax credits program under the Small Business Administration (SBA). During this time of the pandemic, the ERTC tax credit will be a big help for small to medium-scale entrepreneurs, but the lack of understanding can cause a delay. 

The ERTC program lays down qualifications and limitations that may be complicated for small business owners to understand. Who is qualified for the ERTC? What are the conditions? How much tax credit can employers collect? 

Read on to know how you can take advantage of the Employee Retention Tax Credit.  

PPP and ERTC: What Are They?  

The Small Business Administration launched a string of COVID-19 relief options for small business owners. These aim to provide financial assistance to cover their employees’ wages.  

Among the available loan options are the Paycheck Protection Program (PPP) and Employer Retention Tax Credit (ERTC). 

The Paycheck Protection Program (PPP)    

Under the Paycheck Protection Program (PPP), small business owners can apply for a loan for their employees’ wages. Two types of PPP loans are available: first draw and second draw PPP loans.  

Business owners who have not yet availed of the PPP loan before can apply for the First Draw PPP loan, while previous qualifiers can apply for the Second Draw. 

The loans are provided through the participating institutions such as: 

• SBA Microlenders 
• Certified Development Companies (CDCs) 
• Community Development Financial Institutions (CDFIs) 
• Minority Depository Institutions (MDIs) 

The PPP is available for small business owners until May 31, 2021, or until funds last.  

Employer Retention Tax Credit (ERTC)    

The Coronavirus Aid, Relief, and Economic Security (CARES) Act includes provisions for small business owners granting them a tax refund for wages paid to retained full-time employees. The provision is called the Employee Retention Tax Credit (ERTC), and it was signed into law on March 27, 2020. 

The initial rollout of the ERTC program prevented small businesses from using both the PPP loan and ERTC in the same year. This limits the help that business owners can benefit from, especially when their business suffered a major downturn. 

Congress recognized the issue and crafted a new law that introduces a few changes to the ERTC program. On December 27, 2020, the Taxpayer Certainty and Disaster Tax Relief Act (TCDTR), a part of the Consolidated Appropriations Act (CAA), was signed into law. The Acts contained modifications to the ERTC, which include: 

• For each full-time employee retained between March 13 and December 31, 2020, a business owner is entitled to a refundable tax credit of up to $5,000. 
• For each full-time employee retained between January 1 and June 30, 2021, a business owner is entitled to a refundable tax credit of up to $14,000.   
• From 50%, The ERTC credit rate goes up to 70% of qualified wages. 

Previously, a small business owner can only apply for PPP or ERTC programs. But with the recent update, you can now enjoy both financial reliefs at the same time! It would be best to ask an accountant for application assistance to know how you can take advantage of the ERTC and PPP. 

How Much Can an EmployerReceive from the Employee Retention Tax Credit?    

The SBA raises the tax credits for employers from 50% to 70% for the first $10,000 wage paid to each full-time employee. Employers can get a $5,000 credit to the wages of the first $10,000 for each employee for the whole year. 

If an employer, for instance, pays an employee $10,000 per quarter, the employer will receive a $7,000 tax credit.  

ERTC Tax Credits Qualifications in Fort Collins 

In the current version of the ERTC program, the SBA allows business owners with no more than 500 employees to take advantage of financial aid. You qualify for the tax relief if: 

• Your business received a partial or full shutdown order. 
• Your business revenue dropped to 50% or more in any quarter of 2020. 
• If your revenue goes up to 80% compared to the previous year, you are still qualified for the ERTC program. Quarter by quarter, you continue to qualify until revenue hits the 80% mark. 
• You are running a tax-exempt hospital, university, or public college. 

For example, your normal quarterly revenue is $100,000. However, in the next quarter, your revenue fell to $30,000, which is 30% of your quarterly income. This qualifies you for the ERTC, but you are no longer qualified once your revenue goes back up to $80,000. 

Who Are NOT Qualified for the Employee Retention Tax Credits? 

The ERTC tax credits program for small Fort Collins businesses proves to be very helpful in keeping their local economy going. However, not every business owner qualifies. You cannot apply for the loan if: 

• You can still operate or work at home even if your business received a shutdown order 
• You are self-employed with no employees 
• You are running a government or state entity 
• An owner is related to the employee or spouse, their wages are not qualified for ERTC 

Aside from these, there are other criteria that may or may not qualify you for the ERTC tax credits program in Fort Collins. Seeking help from a CPA will help you understand the conditions and get clearer insights.  

The ERTC Tax Credits Can Save Your Small Business in Fort Collins Especially When You Have Right People to Back You  

The ERTC tax credits program will be a life-saver for your Fort Collins business. The financial assistance it offers will help you as an entrepreneur and your employees who need jobs, especially during this time of the pandemic.  

This article has provided you with an overview of how both the ERTC and PPP work, but there is in-depth information that you must take into account before applying. A professional CPA will help you determine whether your business passes the criteria and can enjoy its financial benefits. 

Steven J. Wick & Associates, P.C. is here to help you learn more about your tax credit qualifications. We can also assist you with the paperwork and other requirements to make your application process fast and easy. Our company provides premier tax preparation services, as well as accounting and bookkeeping solutions. As you focus on keeping your business alive, we do the hard work for you.  

To know more about our services, contact us today, and we will give you the assistance you need.