What to Know About the Employee Retention Tax Credit

Employee Retention Tax Credit -Photo by Anastasiia Chepinska on Unsplash

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In response to the pandemic, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted forms of coronavirus relief for employers in the United States. While the most popular is the Paycheck Protection Program (PPP) loan, other forms of relief, such as Employee Retention Tax Credit (ERTC), exist to mitigate the impact of the pandemic.

Rebekah Nuss from Synergi Partners, the largest hiring and retention credit company for the staffing industry, shared her expertise into the extended ERTC and how it can be used to benefit staffing agencies.

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What is the Employee Retention Tax Credit

Employee Retention Tax Credit, otherwise known as “ERTC”, is another response to the stimulus needed for the pandemic. It’s a refundable payroll tax credit employers can claim on their federal employment tax return. It covers employee wages and qualified health plan expenses due to financial or operational decline.

As Rebekah Nuss stated in our episode of Staffing Buzz with Brooke, this means that the credit allocated is calculated as a percentage of wages paid to employees, claimed by amending payroll tax returns up to 70% of qualified wages paid.

Unlike PPP loans, ERTC does not need to be paid back but qualified wages that were included on the loan are not eligible to be included in the tax return as payroll costs.

The recent Consolidated Appropriations Act (CAA) provides businesses with more time to apply for ERTC and allows those who received the PPP loan to retroactively claim other tax credits as well.

Who qualifies for ERTC

Any sized business from any industry (this includes the staffing industry) is eligible to claim the Employee Retention Tax Credit on qualifying wages through December 31st 2021, as long as they meet one of two qualifications experienced in 2020 and 2021:

1) Forced to suspend operations partially or fully due to government orders, including if they had to reduce hours

2) Experienced a significant decline in gross receipts or revenue due to COVID-19

According to Rebekah Nuss, even if your company was profitable during this time, this does not mean that you don’t qualify. For example, if the government test orders affected operations for a light industrial company leading to partial closure since they can no longer accept walk-in traffic, they could qualify even if there was no decline in revenue.

How do I apply for ERTC

Technically, you don’t apply. Employee Retention Tax Credit is claimed on your federal employment tax return (Form 941). You can also apply for an advance of the credits using Form 7200. 

It’s important to retain any documentation that shows how your business operations were affected; anything that shows how the operations were suspended or experienced a significant decrease in gross receipts or revenue.

How can a staffing company get the most out of the Employee Retention Tax Credit

This is arguably the most important section of this blog! Rebekah Nuss ensures that there are no restrictions on how the funds can be allocated. Here are three suggestions on how a staffing company can maximize its return from ERTC:

1) Give back to your employees.

Your agency is only as strong as the employees supporting it. Allocate part of the funds back to the staff that works tirelessly every day to keep the business running.

2) Hire an outside perspective.

One of the best investments that you can make in your agency is hiring someone with the technical expertise and skills to keep certain aspects of your operations running smoothly. This could be in the form of a new employee or outside expertise to introduce a new perspective to the team.

3) Invest in business improvements.

This is a good opportunity to look into improvements that can be made to benefit the workforce. As a staffing agency, this could mean investigating new tools that help resolve gaps in inefficiencies, organization, or communication. There are many on-demand staffing platforms making their way onto the market, designed to supercharge your agency and bring you a level above.

Don’t miss a great opportunity to invest back into your firm. ERTC is a significant and valuable form of relief with the potential to assist many small businesses. If you’re unsure if your agency qualifies, we recommend watching the full episode of Staffing Buzz with Brooke featuring Rebekah Nuss or talking to your tax experts or payroll company to learn more.

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