As an employer in Illinois, you may be facing challenging times due to the after-effects of the COVID-19 pandemic. Fortunately, a program called the Employee Retention Credit (ERC) can provide support through a valuable tax credit. The ERC was established as part of the CARES Act in 2020 and has been extended and expanded to offer even more relief to businesses affected by the pandemic. In this article, we will cover the essential details of the ERC in Illinois, including eligibility criteria and how it can benefit you as an employer.
In Illinois, employers who want to receive the ERC must fulfill specific eligibility requirements. At first, the credit was only accessible to companies that faced substantial revenue decline or were mandated to shut down by the government. However, after subsequent legislation, the eligibility criteria became more extensive. Now, employers can apply for the ERC if they experienced a significant decline in gross receipts, regardless of government orders in 2020 and 2021. Alternatively, businesses can qualify if they had to fully or partially suspend their operations due to COVID-19-related restrictions.
Calculating the ERC
Eligible wages paid to employees during a specific period are considered to calculate the ERC. For businesses with 500 or fewer full-time employees, eligible wages include those paid to retained and furloughed employees. The credit equals 70% of qualified wages, with a cap of $10,000 per employee per quarter. This means employers can claim up to $7,000 per employee per quarter for the first three quarters of 2021. In addition, a credit of up to $5,000 per employee can be claimed for 2020, resulting in a maximum credit of $26,000 per employee.
Interaction with other relief programs
Previously, according to the CARES Act of 2020, businesses that had already received a Paycheck Protection Program (PPP) loan were not eligible to receive the ERC. However, with new legislation introduced in 2021, employers can now qualify for both programs. It’s important to note that the wages used for PPP cannot be the same as those used for ERC.
Claiming the ERC
To receive the ERC, employers must declare their qualifying wages and the credit amount on their quarterly employment tax returns (Form 941-X). Alternatively, eligible employers can reduce federal employment tax deposits by the expected credit amount. If the ERC surpasses the amount owed, employers can request an advance payment by submitting Form 7200.
Employers in Illinois can benefit greatly from the Employee Retention Credit (ERC) during difficult times. This credit provides important financial assistance and encourages businesses to retain their employees. To make the most of this program, it’s important to understand the eligibility requirements, accurately calculate the credit, and effectively manage interactions with other relief programs.
Employers must stay current and seek advice from experts specializing in the Employee Retention Credit (ERC) for the most current information and direction.
Bottom Line Concepts Can Help You Claim the ERC in Illinois
If you want to receive the ERC for wages paid in 2020 and the first three quarters of 2021, you need to file Form 941-X, which is the Employer’s Quarterly Federal Tax Return. It’s important to note that determining eligibility and calculating the amount of tax credit can be quite complicated, and it’s crucial to submit the forms to the IRS with complete accuracy in order to receive the credit you’re entitled to.
Over 25,000 businesses, including many in Illinois, have been assisted by Bottom Line Concepts in enrolling for the ERC program. Feel free to reach out to us today to determine if you are eligible and to learn how to claim this beneficial credit you may be entitled to.