Following the shrunken and deflated economy after the unprecedented shock of the COVID-19 pandemic, many were left virtually clueless. Because the cost of business operations suddenly became higher and higher, the government aimed to mitigate this and stimulate economic recovery. One of the ways they attempted to do so was by providing the Employee Retention Credit (ERC). Essentially, the drastic cut in revenue is usually negatively correlated with the number of staff employed. But how exactly does ERC’s translate to compensation?
Although the program ended 2 years ago, you can still claim ERC’s on federal tax for 2020 and 2021. The amount of ERC earned per employee is highly dependent upon the wage of non-worker employees. Consequently, businesses are financially incentivized to keep ‘employed but non-working’ staff. Simply put, the government covers some of the cost in order to keep unemployment low, allowing the economy to more swiftly and more easily recover from COVID-19.
Ultimately, ERC’s are a wonderful opportunity, especially for struggling businesses after the pandemic. Fortunately, the convoluted nature of ERC’s attracts businesses that make this process smoother and more accessible. Businesses like Credit League not only check eligibility, but also have dedicated teams of both attorneys and CPAs ready to help any business owners get the most out of ERC’s.