As a small business owner in New York, you may be eligible for the Employee Retention Credit (ERC), a tax credit designed to help businesses keep their employees on payroll during the COVID-19 pandemic.
This credit can provide a significant financial benefit to small businesses, but it can be complex to navigate and optimize. In this article, we’ll provide tips and strategies for maximizing the ERC as a small business owner in New York.
What is the Employee Retention Credit?
The Employee Retention Credit is a refundable tax credit available to businesses that have been financially impacted by COVID-19. It is equal to 50% of qualified wages (up to $10,000 per employee) paid from March 13, 2020 to December 31, 2020. In 2021, the credit has been extended through June 30, 2021 and is equal to 70% of qualified wages (up to $10,000 per employee).
To be eligible for the credit, a business must meet one of the following criteria:
- The business was fully or partially suspended by a government order due to COVID-19
- The business experienced a significant decline in gross receipts in a quarter compared to the same quarter in the prior year.
If you’re not sure if your business is eligible for the ERC, you can use the IRS’s ERC Eligibility Self-Check tool to determine your eligibility.
Tips for Maximizing the Employee Retention Credit
- Keep good records: To claim the ERC, you’ll need to keep track of your qualified wages and the number of employees on your payroll. Make sure to keep detailed records of all payroll expenses, including pay dates and amounts, as well as any government orders or notices related to COVID-19 that impacted your business.
- Claim the credit on your tax return: You can claim the ERC on your quarterly or annual tax return, depending on the size of your business. If you’re eligible for the credit, you can claim it on your Form 941 (Employer’s Quarterly Federal Tax Return) or Form 943 (Employer’s Annual Federal Tax Return for Agricultural Employees).
- Consider modifying your payroll: If you’re eligible for the ERC, you may want to consider modifying your payroll to maximize the credit. For example, you could increase your employees’ wages to increase the amount of qualified wages you can claim.
- Take advantage of the credit carryover: If you don’t use the entire credit in the quarter you claim it, you can carry over any unused credit to the next quarter. This can be especially useful if your business experiences fluctuations in gross receipts throughout the year.
- Work with a tax professional: The ERC can be complex to navigate, and it’s important to make sure you’re maximizing your credit and complying with all the rules and regulations. Consider working with a tax professional to ensure you’re taking advantage of all the available credits and deductions.
Conclusion
The Employee Retention Credit can provide a much-needed financial boost for small businesses in New York that have been impacted by COVID-19.
By keeping good records, claiming the credit on your tax return, modifying your payroll, taking advantage of the credit carryover, and working with a tax professional, you can maximize the ERC and help keep your business running smoothly during these challenging times.
