The Employee Retention Credit (ERC) is a vital program designed to support employers in Minnesota during challenging times. This valuable tax credit was established as part of the CARES Act in 2020 and was extended and expanded to provide further relief to businesses affected by the COVID-19 pandemic. In this article, we’ll delve into the key aspects of the ERC in Minnesota, its eligibility criteria, and how it can benefit employers.
To qualify for the ERC, employers in Minnesota must meet certain eligibility requirements. Initially, the credit was only available to businesses that experienced significant revenue decline or were subject to government-mandated shutdowns. However, with subsequent legislation, the eligibility criteria were broadened. Now, employers can claim the ERC if they experienced a significant decline in gross receipts, irrespective of government orders. Alternatively, businesses are eligible if their operations were fully or partially suspended due to COVID-19-related restrictions.
Calculating the ERC
The ERC is calculated based on eligible employee wages during a specified period. For businesses with 500 or fewer full-time employees, eligible wages include wages paid to retained and furloughed employees. The credit equals a percentage (70%) of qualified wages, up to a maximum of $10,000 per employee per quarter. This means an employer can claim a maximum credit of $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
Initially, under the CARES Act of 2020, businesses could not qualify for the ERC if they had already received a Paycheck Protection Program (PPP) loan. With new legislation in 2021, employers are now eligible for both programs. The ERC, though, cannot apply to the same wages as the ones for PPP.
Claiming the ERC
To claim the ERC, employers must report their eligible 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 anticipated credit amount. If the ERC exceeds the federal employment tax deposits, businesses can request an advance payment by submitting Form 7200.
The Employee Retention Credit (ERC) serves as a lifeline for employers in Minnesota, offering crucial financial support and encouraging employee retention during challenging times. Businesses can maximize their benefits by understanding the eligibility criteria, calculating the credit, and navigating the interactions with other relief programs.
Employers need to stay informed and consult with professionals specializing in the ERC for the latest updates and guidance.
Bottom Line Concepts Can Help You Claim the ERC in Minnesota
To claim the ERC retroactively for wages paid in 2020 and the first three quarters of 2021, employers must file Form 941-X, Employer’s Quarterly Federal Tax Return. Determining eligibility and the amount of the tax credit your business is due can be complex, and the forms submitted to the IRS must be 100% accurate to receive your credit.
Bottom Line Concepts has helped over 25,000 businesses enroll in the ERC program, including many located in Minnesota. Contact us today to see if you qualify and how to claim this valuable credit you may be entitled to.