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The Employee Retention Tax Credit: What You Need To Know

The Employee Retention Tax Credit: What You Need to Know

In wake of the pandemic, the United States Federal Government took unprecedented steps to avoid certain economic consequences. Included among the CARES Act’s multi-trillion-dollar stimulus package were the Paycheck Protection Program (PPP) and the Employee Retention Tax Credit (ERTC). Our team here at Troy Bank & Trust wants to make sure you’re prepared to get the most out of your employee retention tax credit. 

Troy Bank & Trust has been working with businesses throughout the State of Alabama. It’s our number one priority to ensure that our clients not only survive periods of economic recession but also thrive. Doing so requires knowing everything you can about the ERTC. 

What Is The Employee Retention Tax Credit?

The Origins of the Employee Retention Tax Credit

Along with the PPP loans, the Employee Retention Tax Credit is one of many CARES Act programs. They provided both businesses and citizens with the cash they needed. However, rather than putting money directly into the hands of business owners, the Employee Retention Tax Credit gave businesses a tax break for keeping their workers on staff. 

Initially, businesses that received the PPP loan were not eligible for the ERTC. The Consolidated Appropriations Act, however, modified the CARES act. Which allowed businesses to apply for both the PPP Loans and the ERTC program. The modification also extended the ERTC application period to early 2021. Then the American Rescue Plan extended it yet again to the end of 2021. 

The Infrastructure and Investment Jobs Act made further changes to the employee retention tax credit program. After September 30, 2021, businesses were no longer eligible for the ERTC.

The ERTC Program’s Basics

You may be aware of the basic elements of the employee retention tax credit program. Businesses eligible for the program are receiving up to 70%  of their staff’s qualifying wages per quarter. At maximum, businesses are eligible to receive $7,000 per employee. But there are a lot of extenuating circumstances that confuse employers with regard to eligibility and timing. 

Who’s Eligible for the ERTC Program?

Troy Bank & Trust has been working closely with each of our client businesses and business owners. As we have relayed to our clients, to be eligible for the ERTC program, your business must meet either of the following two criteria:

  • Government Order Test: Businesses that operate for a calendar quarter during “which the operation of the trade or business is fully or partially suspended…due to order from an appropriate government authority limiting commerce, travel or group meetings (for commercial, social, religious or other purposes) due to COVID-19.”
  • Reduced Gross Receipts Test: Businesses that can show a significant decline in revenues.
    • For 2020, a decline in revenues of 50% or more over the course of any calendar quarter compared to the same quarter in 2019.
    • For 2021, a decline in revenues greater than 20% during any of the first three quarters as compared to the same quarter in 2019.
      • Only for 2021, businesses that fail to fulfill the above criteria are allowed to use revenues in the immediately previous quarter compared to the same quarter in 2019 to determine revenue declines of greater than 20%.

The eligibility criteria may seem overwhelming. Working with Troy Bank & Trust allows you to breathe easier, knowing that you can receive the latest, most accurate information. 

ERTC Application Details

Understanding your basic eligibility is only the first step. Being granted your Employee Retention Tax Credit requires that you understand every aspect of your business. As well as convey this information accurately on the application paperwork. 

As mentioned above, the U.S. Federal Government has added several modifications to the existing ERTC program. In turn, the IRS has offered new guidance to reflect these changes. Companies that submitted earlier paperwork, such as Form 7200, must follow rigid steps to ensure continued eligibility and sound processing. 

It’s very difficult for businesses both small and large to stay apace with these changes. This is particularly so when the changes cause a domino effect of alterations to your eligibility and application status. 

As a local independent bank, Troy Bank you won’t wait in long queues, whether on the phone, online, or in person. Our mobile app, partnered with Zelle, provides another layer of access that’s at least on par with big-box banks for whom you and your business are just another number. 

The Employee Retention Tax Credit offers businesses a much-needed lifeline during these unprecedented times. Unfortunately, the process isn’t a walk in the park. Creating a complete manual would require several blogs at the least. Luckily, by working with Troy Bank & Trust, you don’t have to memorize every little detail. As a local independent bank, our ERTC program experts will walk you through the process and provide status updates along the way. 

Troy Bank & Trust wants to help you with your debt and borrowing needs

As a local independent bank, banking with us means you’re also helping your local economy, and we make your banking experience more accessible. Allow us to help you with your checking and savings needs. While giving you the peace of mind that planning for your loved ones brings. After all, we are “the only bank you’ll ever need.” For more information on working with us for your business needs, visit Troy Bank & Trust here, or reach out to us by phone at 334-566-4000 or 888-258-8769.