The Employee Retention Tax Credit is a refundable payroll tax credit that was created by the CARES Act and provided an incentive during the pandemic for employers to keep their employees on payroll.

The credit is not like the Paycheck Protection Program, which were forgivable loans. Rather, the government provided relief in the form of a refundable credit on payroll taxes due to the IRS. The credit is essentially an offset against the cost of keeping employees on payroll during the course of the pandemic and comes to employers as a refund of Social Security and Medicare contributions that employers would be otherwise obligated to pay.

Unlike other programs, Congress did not elect to wrap up the Employee Retention Tax Credit and the program is still active. Therefore, an employer may seek reimbursement up to a certain amount for payments on payroll tax returns for tax years 2020 and 2021. This program will phase out gradually as the statute of limitations for amending payroll tax returns passes starting in 2023.

While this may seem too good to be true, these credits are widely available to businesses who were impacted by the pandemic. However, because the application of the ERC can be somewhat technical, there are many misconceptions that lead business owners to believe that they do not qualify when they actually do. Contact Brotman Law for an assessment as to whether your business qualifies for this credit.