Employee retention is an important factor for any business, as it can have a significant impact on productivity, morale, and overall success. In an effort to help businesses retain their employees, the federal government has created the Employee Retention Credit (ERC). This credit is designed to provide financial support to employers who are facing economic hardship due to the COVID-19 pandemic and are struggling to keep their employees on payroll.
If you’re an employer in New York and you’re looking to maximize your ERC, here are some best practices to follow:
- Determine if you’re eligible for the ERC: The ERC is available to employers who have experienced a full or partial suspension of their operations due to COVID-19, or who have experienced a significant decline in gross receipts. To qualify, your business must have been in operation on March 12, 2020 and must have paid qualifying wages to your employees.
- Calculate your ERC: The amount of the ERC is based on the wages you pay to your employees and the number of employees you have. For businesses with more than 100 full-time employees, the ERC is equal to 50% of the qualified wages you pay to your employees, up to a maximum credit of $5,000 per employee. For businesses with 100 or fewer full-time employees, the credit is equal to 70% of the qualified wages you pay to your employees, up to a maximum credit of $7,000 per employee.
- Keep good records: In order to claim the ERC, you’ll need to keep accurate records of your employee wages and your gross receipts. This includes keeping track of the hours your employees work and the wages you pay them, as well as documentation of any reduction in gross receipts.
- Claim the ERC on your tax return: The ERC is claimed on your business’s tax return, using Form 941 (Employer’s Quarterly Federal Tax Return). Make sure to include all of the necessary information and documentation, as the IRS may request proof of your eligibility for the credit.
- Take advantage of other resources: In addition to the ERC, there are other resources available to help businesses retain their employees during the COVID-19 pandemic. These include the Paycheck Protection Program (PPP) and the Families First Coronavirus Response Act (FFCRA), which provide financial assistance to businesses that have been impacted by the pandemic.
By following these best practices, you can maximize your ERC and help ensure the long-term success of your business. While the COVID-19 pandemic has presented many challenges for businesses, the ERC and other resources can provide the support you need to retain your valuable employees and emerge stronger on the other side.
