Employee Retention Tax Credit FAQ's

Q&A's about the ERTC

Can you help me file for the ERTC if I am not a Payroll Vault client?

Yes, we will be happy to assist you.
 

Who can I contact to discuss this ERTC opportunity?

Contact Vinny Saini here at Payroll Vault Pleasanton.

Why am I just hearing about the Employee Retention Tax Credit?

There was a change to the CARES act on December 27, 2020, that now allows businesses who received a PPP loan to now qualify to receive these tax credits on wages paid out during the same time.

How do I qualify for the retroactive 2020 credit?

Businesses who paid under 100 employees (full time equivalents) in 2019 -

  • AND If during COVID the company had partial or total business closure due to federal, state or local COVID order
  • OR more than 50% reduced gross revenue as compared to the same quarter in 2019.

Businesses then remain eligible until the end of the first quarter where their revenues go back up over 80% compared to the same quarter in 2019

(NOTE: New businesses who do not have 2019 revenue can compare to prior quarters.)

How do I qualify for the 2021 ERTC credit?

Businesses who paid under 500 employees (full time equivalents) in 2019 -

  • AND If during COVID the company had partial or total business closure due to federal, state or local COVID order
  • OR more than 20% reduced gross revenue as compared to the same quarter in 2019.

(NOTE: You do compare 2021 revenue to 2019 revenue still. Think of it as comparing pre-COVID numbers to during-COVID numbers.)

Will this affect my PPP Loan forgiveness?

No, the PPP Loan amount is deducted from the ERTC calculations and will be kept separate as required.

How is the ERTC calculated retroactively for 2020?

Payroll Vault will calculate your credit based upon gross wages paid during your shut down/lost revenue times. The PPP Loan amount is deducted from your qualifying wages. The remaining wages are then capped out at $10,000 per employee. The credited amount is divided in half, making the credit amount a maximum of $5,000 per employee for 2020.

How is the ERTC calculated for 2021?

Payroll Vault will calculate your credit based upon gross wages paid during your shut down/lost revenue times. The PPP Loan amount is deducted from your qualifying wages. The remaining wages are then capped out at $10,000 per employee. The credited amount is multiplied by 70% making the credit amount a maximum of $7,000 per employee PER QUARTER for 2021.

Why am I getting this credit?

This is a government refund/reward for keeping your employees on payroll during COVID down time due to full or partial shutdown or lost revenue.
 

Will we need to pay taxes on this refund?

Yes, you will pay taxes on the refund amount on your business return as it reduces the payroll expenses paid. Make sure to talk to your accountant for details.

How will I receive the refund?

You will receive a paper check via USPS mail from the IRS.

When can I expect to receive the refund?

The estimated refund time is 6-8 weeks when filing a current 2021 941 quarterly report with your ERTC credit, and several months when filing an amended 941 quarterly report requesting ERTC credit from prior quarters.
 

When does Payroll Vault collect their fee?

After you have received your refund from the IRS. We will watch your IRS activity on your behalf for progress on the process.
 

Is this legitimate legislation?

Yes. The copy of the IRS FAQs can be found here. A good breakdown of the explanation of the law via Forbes can be found herehere, and here.

Was the ERTC extended for all quarters in 2021?

Yes. The ARPA extended the maximum $7,000 per employee per quarter credit to all 4 quarters of 2021 for those businesses who meet the original criteria.

I am a new business who received both rounds of PPP loans. Can I still take advantage of the ERTC?

Yes, but you will need to subtract the PPP funds that were used for wages for the same time frame you are calculating your ERTC. Payroll Vault can help with these complicated calculations to make sure you can maximize your credits while staying in compliance with your PPP loan forgiveness.

I started my business in 2020, but didn’t close or have reduced revenue. What credits are available to me?

As part of the American Rescue Plan Act (ARPA), new businesses who started after February 15th 2020 are able to take advantage of the Employee Retention Tax Credit (ERTC) too. The wage and credit calculations will be the same, but the cap for the credit is $50,000 for the 3rd and 4th quarters of 2021.

I am a small business owner who was in business for a few years leading up to the pandemic. I was not closed nor did I have reduced revenue during Covid. Am I eligible for ERTC?

If you started a new trade from your existing business after February 15th 2020, you could be eligible under the Recovery Start-up clause of the ARPA. The limit will be $50,000 per quarter for the 3rd and 4th quarters of 2021.

Listen to this podcast featuring Tricia Petteys and her insights on ERTC

ERTC is a very important topic for small and medium sized businesses. Tricia Petteys, Co-Founder and COO of Payroll Vault shared some great insights regarding challenges companies are facing during the pandemic and how successful companies are utilizing the available help. Listen to what she has to say here if you want to find the money that the government is rewarding you for keeping your employees during the pandemic.

Employee Retention Tax Credit

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