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Is your small business entitled to the Employee Retention Credit?

If you retained your employees while your business was closed or limited in 2020, you might be able to get a 70% tax credit on Social Security payments.

There's help for COVID Relief tax credit confusion. (Photo by Pexels user Mikhail Nilov, used under a Creative Commons license)

As part of the Coronavirus Aid, Relief and Economic Security Act (aka the CARES Act) enacted in 2020, employers impacted by the COVID-19 shutdowns and limitations saw plenty of benefits designed to keep them in business. Among them: Those who kept their employees on the payroll — including the help of the Paycheck Protection Program — would be entitled to a federal Employee Retention Credit (ERC).

At the end of December, changes were made to the ERC in the Taxpayer Certainty and Disaster Tax Relief Act of 2020, including modifying and extending it for six months, through June 30, 2021.

Per the IRS:

“Eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021.”

Who is eligible? If you have 10 or more employees, had to close or restrict your business or lost more than 20% in earning compared to the previous year, and still paid employees who did not fully provide services due to COVID-19 restrictions, you may be able to claim the credit.

If you’re a small business employer not sure whether or not you qualify, the Delaware Small Business Development Center (SBDC) is offering an ERC support program especially for employers of 10 to 50 workers. The program includes discounted and, for select businesses, free tax preparation.

The SBDC will be offering a free lunch and learn webinar on Thursday, April 29, from noon to 1 p.m. The session will explain the ERC and its eligibility guidelines, as well as how to apply for the support program.

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