As a Maryland employer, you may still be dealing with the aftermath of the COVID-19 pandemic. Thankfully, a program known as the Employee Retention Credit (ERC) can offer aid through a valuable tax credit. The ERC was created as a part of the CARES Act in 2020 and was extended and expanded to provide even more assistance to businesses impacted by the pandemic. This article will cover the necessary information about the ERC in Maryland, such as the eligibility requirements and how it can benefit you as an employer.
To receive the ERC in Maryland, employers must meet certain eligibility requirements. Initially, the credit was only available to companies that had experienced a significant drop in revenue or were forced to close by the government. However, the eligibility criteria were expanded. Now, employers can apply for the ERC if they suffered a significant decrease in gross receipts in 2020 or 2021, regardless of government orders. Additionally, businesses can also qualify if their operations were fully or partially suspended due to COVID-19-related restrictions.
Calculating the ERC
To calculate the ERC, the eligible wages paid to employees during a specific period are taken into account. For businesses with 500 or fewer full-time employees, the eligible wages include those paid to retained and furloughed employees. The credit is equal to 70% of qualified wages, with a cap of $10,000 per employee per quarter. This means that employers can claim up to $7,000 per employee, per quarter, for the first three quarters of 2021. A credit of up to $5,000 per employee can also be claimed for 2020, resulting in a maximum credit of $26,000 per employee.
Interaction with other relief programs
Under the CARES Act of 2020, businesses previously receiving a Paycheck Protection Program (PPP) loan were not eligible for the Employee Retention Credit (ERC). However, new legislation introduced in 2021 allows employers to qualify for both programs. It’s important to remember that the wages utilized for PPP cannot be the same as those used for ERC.
Claiming the ERC
For employers to receive the ERC, they must declare their qualifying wages and the credit amount on their quarterly employment tax returns, specifically on Form 941-X. Alternatively, employers can reduce their federal employment tax deposits by the expected credit amount by submitting Form 7200 if they are eligible.
Maryland employers can receive significant support through the Employee Retention Credit (ERC) when facing challenging times. This credit offers crucial financial aid and motivates companies to keep their staff employed. To maximize the benefits of this initiative, it’s essential to comprehend the eligibility criteria, precisely compute the credit amount, and efficiently coordinate with other relief programs.
Employers should ensure they are updated and seek guidance from experts who specialize in the Employee Retention Credit (ERC) to get the latest information and guidance.
Bottom Line Concepts Can Help You Claim the ERC in Maryland
To claim the ERC for wages paid in 2020 and the first three quarters of 2021, you must file the Employer’s Quarterly Federal Tax Return, also known as Form 941-X. However, it’s essential to remember that determining eligibility and calculating the tax credit amount can be complex. Therefore, ensuring that the forms you submit to the IRS are accurate is crucial to receive the credit you’re entitled to.
Bottom Line Concepts has assisted more than 25,000 businesses, including many in Maryland, with enrolling in the ERC program. If you’re eligible and want to learn how to claim this beneficial credit that you may be entitled to, please don’t hesitate to contact us today.