7. What are "qualified health plan expenses"?
by Admin
Posted on 09-11-2022 01:26 PM
The employee retention credit (erc) was enacted in the coronavirus aid, relief, and economic security act (cares act) in march 2020 to encourage eligible employers financially impacted by the covid-19 pandemic to keep employees on their payroll.
The consolidated appropriations act (caa) stimulus package signed in late december 2020 included an expansion of the erc for eligible employers that continue to pay employee wages during covid-19 closures or after experiencing reduced revenue. The erc provides a payroll tax credit equal to:
in 2020, 50% of the qualified wages (including qualified health plan expenses) that an eligible employer paid in a calendar quarter in 2020.
Qualified wages for the erc include the portion of group health plan expenses (including both employer contributions and pre-tax employee contributions) that is allocable to otherwise qualifying wages. The determination of which wages are qualified wages is different depending on whether you are a large or small employer. For employers who averaged less than 100 full-time employees during 2019, qualified wages are those paid to any employee during a period in which your operations are fully or partially suspended by order of a governmental authority or during which you have a decline in gross receipts. For employers who averaged more than 100 full-time employees during 2019, qualified wages are generally those wages, including certain health care costs, (up to $10,000 per employee) paid to employees that are not providing services because operations were suspended or due to the decline in gross receipts. https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act
In general, wages/compensation that are subject to fica taxes, as well as qualified health expenses, qualify when calculating the employee retention credit. These must have been paid after march 12, 2020 and qualify for the credit if paid through dec. 31, 2021. Remember, the credit can only be taken on wages that are not forgiven or expected to be forgiven under ppp or used for any other types of credits that are determined using wages. Qualified health expenses, generally include the employer and employee pretax portion and not any after-tax amounts. Also, when determining the qualified wages that can be included, an employer must first identify the number of full-time employees.
8. Is an Employer required to pay qualified wages to its employees under the CARES Act?
During the height of the covid-19 pandemic, the federal government acted with new legislation that provides economic relief to employers and employees. The coronavirus aid, relief and economic security (cares) act was signed into law on march 27, 2020 and contains a provision that provides a refundable tax credit against certain employment taxes equal to 50% of the qualified wages (maximum of $10,000 per eligible employee) an eligible employer pays to employees after march 12, 2020 and before january 1, 2021. This is called the employee retention credit (erc). Unfortunately, not every employer is eligible for the erc. For example, if an employer receives a paycheck protection program (ppp) loan, which is also a provision of the cares act, the employer does not qualify for the erc.
The employee retention tax credit (ertc) was created as part of the cares act to encourage businesses to continue paying employees by providing a credit to the eligible employer for wages paid to eligible employees. The refundable credit is available from march 13, 2020 through september 30, 2021, and can be utilized even if companies received ppp loans.
The employee retention credit is a fully refundable payroll tax credit pertaining to wages paid in a given quarter for full and part-time employees. The employee retention credit covers up to 70% of qualified wages paid during an eligible quarter. Wages include direct compensation and health insurance paid for each employee. For 2021, the credit is limited to 70% of the employee’s wages up to $10,000 per eligible quarter. This means an employer may claim a credit of up to $7,000 per employee, per eligible quarter. Recently, the infrastructure investment and jobs act of 2021 retroactively ended the employee retention credit to apply only through september 30, 2021 for most businesses.
9. Can Eligible Employers claim the Employee Retention Credit for qualified wages paid in March 2020?
Although the employee retention tax credit (ertc) is expiring at the end of 2021, there's still time for eligible businesses to claim the credit, if they haven't already. "eligible employers are still able to take advantage of the employee retention credit against applicable employment taxes and qualified wages paid to their employees through dec. 31, 2021," said allan smith, senior manager of operating risk and strategic initiatives at paychex, an hr and payroll services firm. "although the program is set to sunset at the end of 2021, the credit can be claimed on amended payroll tax returns as long as the statute of limitations remains open, which is three years from the date of filing," said brent johnson, co-founder and ceo of clarus r+d, a maker of software for claiming tax credits.
Employers who qualify can include borrowers who took the loan under the ppp, and this credit is claimed against 50 percent of those qualified wages paid. This is up to $10,000 for each employee annually based on wages paid between march 13, 2020, and december 31, 2020.
The employee retention credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that eligible employers pay their employees. This employee retention credit applies to qualified wages paid after march 12, 2020, and before january 1, 2021. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an eligible employer for qualified wages paid to any employee is $5,000. For 2021, the credit is equal to 70 percent of qualified wages (including allocable qualified health plan expenses) that eligible employers pay their employees.
The employee retention credit (erc) is a fully refundable tax credit for eligible employers. It was initially created by the 2020 cares act to encourage businesses to keep employees on their payroll during widespread business interruptions caused by the pandemic. Originally, the erc was unavailable to employers who received paycheck protection program (ppp) loans. Subsequently, congress expanded erc eligibility in the taxpayer certainty and disaster tax relief act of 2020. The act was part of a larger covid-19 relief bill, the consolidated appropriations act of 2021, which became law on december 27, 2020. The tax relief act of 2020 made the erc available to employers who received ppp loans, as long as non-ppp funds were used to calculate the credit.
Effective january 1, 2021, employers are eligible to claim the erc if they operated a trade or business during 2021, and experienced either: a full or partial suspension of the operation of their trade or business during a calendar quarter on account of a governmental order limiting commerce, travel or group meetings due to covid-19; or a decline in gross receipts in the first, second or third calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80% of the gross receipts in the same calendar quarter in 2019. For the calendar year 2021, eligible employers can claim a credit of up to 70% of qualified wages paid to employees after december 31, 2020, and before october 1, 2021.
The erc is a refundable tax credit first established in 2020 under the coronavirus aid, relief, and economic security act (cares act). The credit was created to help businesses keep employees on their payroll during the covid-19 pandemic. Since then, the credit has gone through a number of changes, including expanded eligibility; it’s now also available to employers who obtained loans under the paycheck protection program (ppp). Most eligible businesses can claim the erc for wages paid to employees between march 13, 2020 and sept. 30, 2021. How much could you stand to receive from the erc? the amount depends on when you’re eligible to file a claim.