The Employee Retention Tax Credit (ERTC) is a refundable credit that companies can claim on qualifying salaries, including certain health insurance costs, paid to employees. Despite the program's expiration, businesses can still apply for the ERTC retroactively. Wages eligible for the ERTC are salaries and health insurance benefits paid to an employee who is not providing services due to the pandemic. The American Rescue Plan Act (ARPA) allows small employers who received a loan from the Paycheck Protection Program (PPP) to also apply for the ERTC.
The Consolidated Appropriations Act enabled all eligible employers to apply for the ERTC, even if they had received a PPP loan. Wages eligible for a small employer are all salaries and health insurance benefits paid to an employee during the period in which the employer is considered an eligible employer. The ERTC is a measure of relief from the CARES Act for companies that were eligible and kept employees on the payroll. It is a credit to offset the cost of employee payroll taxes that small businesses withheld during the pandemic.
If the amount of the ERTC exceeds the OASDI taxes imposed on the employer, it is considered a refundable overpayment. It is important to ensure that all eligible expenses, including non-payroll costs such as utility, rent and operating expenses, are included in PPP loan forgiveness requests in order to maximize the qualifying salaries available to the ERTC. This will help businesses get the most out of their ERTC applications.