Most people remember the early days of the COVID-19 pandemic as a particularly uncertain time. Many of us felt unsettled not just about our personal health and wellness, but about broader economic issues, as well. Many employers had no choice but to lay off part of their workforce, leaving countless individuals suddenly unemployed.

To incentivize employee retention, the government provided a tax credit, initially authorized in March 2020, and renewed multiple times since then. It’s called the Employee Retention Tax Credit, and if your business paid qualified wages to employees post-March 12, 2020, then you may qualify. Here’s everything you need to know.

Can you still apply for the ERTC?

First and foremost, yes you can qualify for the ERTC, even though the program itself has been wound down and you can no longer pay wages to qualify for the program. Business owners have until April 2024 to look back at their financial records from Q2, Q3 and Q4 2020 to see if they qualify for a retroactive tax credit. Businesses have until April 2025 to look back at their eligibility from 2021. If you are eligible to receive a retroactive credit, you’ll need to file an amended tax return.

Do you qualify for the ERTC?

If you paid salaries to your employees between Mach 12, 2020 and Sept. 30, 2021, then you may qualify for the ERTC. 

The ERTC is available to a wide range of businesses spanning many different industries. In order to qualify, you must be able to check one of the following three boxes:

• Your business was partially or completely suspended, or was ordered by the government to reduce its business hours. (If your business was deemed “essential” during the pandemic, this one probably doesn’t apply to you.)
• Your business has witnessed a significant decline in gross receipts.
• Your company is considered to be a recovery startup business, meaning you launched your company after February 15, 2020, and your annual gross receipts are less than $1 million.

If your business meets any of these criteria, then you may be able to claim employee wages that are subject to FICA taxes, plus some qualified health expenses, for the ERTC.

Does the ERTC need to be repaid?

Here’s some good news about the ERTC: It’s purely a tax credit, not a loan. What this means is you’re not on the hook for repaying the government, but instead can invest that money into the ongoing success of your business.

Claiming your tax credit

If you believe that your business is eligible to claim this tax credit retroactively, you’ll want to file an amended tax return for any quarter(s) in question, specifically including Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. Of course, it may also be wise to speak with your accountant or bookkeeper to determine the best course of action. You can also get plenty of additional information on the IRS website.

This program may be inactive, but it remains a vital way for businesses to recoup some of their COVID-era losses, and to reward themselves for maintaining their workforce throughout an uncertain season.

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About the author 
Amanda Clark is the president and editor-in-chief of Grammar Chic, a full-service professional writing company. She is a published ghostwriter and editor, and she's currently under contract with literary agencies in Malibu, California, and Dublin. Since founding Grammar Chic in 2008, Clark, along with her team of skilled professional writers, has offered expertise to clients in the creative, business and academic fields. The company accepts a wide range of projects; often engages in content and social media marketing; and drafts resumes, press releases, web content, marketing materials and ghostwritten creative pieces. Contact Clark at www.grammarchic.net.