The Guide to Coronavirus Tax Relief for 2022
The federal government created several COVID-19 stimulus programs during the pandemic’s initial phase. Through credits for coronavirus payroll tax relief, these schemes seek to help businesses.
Many firms lose out on the chance to participate due to the programs and numerous amendments’ confusion. In 2020 and 2021, just 8% and 10%, respectively, of business owners filed for ERTC.
In 2022, you can still submit a claim for the COVID payroll tax credit. To find out how to assess your company’s eligibility and what paperwork you need to submit a claim, keep reading.
ERC vs. ERTC
When submitting tax returns for COVID payroll relief, you will need two terms. Employee Retention Tax Credit (ERTC) and Employee Retention Credit (ERC) are two terms for the same credit.
They are the result of the CARES Act. Which was passed in March 2020 and provides aid and economic security for those affected by the coronavirus. The intention is to support employers in keeping staff on the payroll.
The Covid Relief Programs
Determining the rules has been difficult since the Coronavirus Aid, Relief and Economic Security (CARES) Act’s initial revision in March 2020 due to multiple revisions and adjustments. The CARES Act rules only permit firms to get ERTC or a Payroll Protection Program (PPP) loan. Not both, at the time of introduction.
There are further possibilities available in addition to those two programs. Contact Your Part Time Accountant if reading this makes your head spin. And you’re unsure of the best course of action for your company. They will make sure you submit applications for every coronavirus payroll tax relief that you are eligible for.
Act to Provide Additional Funding (CCDF)
With this legislation, the Child Care and Development Fund will get $10 billion in additions. The goal is to support states as they react to the coronavirus.
By September 30, 2022, all states, territories, and tribes must submit reports outlining how the money will be used.
American Rescue Plan
Tax benefits for small firms, such as the ERC and Paid Leave Credit, are extended by the American Rescue Plan. With the new ERC deadline of December 2021, businesses will be able to deduct up to $7,000 per employee every quarter from their payroll tax obligations.
By offering paid leave to workers taking time off for illness, caregiving, or quarantine, the Paid Leave Credit supports small and midsize firms.
Loan for Economic Loss and Disaster (EIDL)
Due to the pandemic, small businesses are now able to apply for assistance through the EIDL. If approved, small firms can get up to $10,000 in total, or $1,000 per employee.
The program will conclude on December 31, 2021, or when all funds under the Consolidated Appropriations Act of 2021 have been used.
A low-income community and a 30% drop in gross receipts for any 8 weeks between March 2, 2020, and December 31, 2021, are requirements for qualifying enterprises. The new coronavirus tax relief award is only available to previous candidates.
Program for Paycheck Protection (PPP)
For small enterprises to continue paying their employees during the COVID-19 shutdowns, this initiative offers loans to them. The proposal stopped accepting applications on August 8, 2020, then resumed after more money became available through the Consolidated Appropriations Act. The last day for submissions is March 31, 2021.
Taxes paid by businesses on expenses paid with PPP funding are deductible. There is no tax due on the forgiven loans.
PPP loans now have more flexibility thanks to the PPP Flexibility Act. Which took effect on June 5, 2020. Extending the application deadline to March 31, 2021, gives firms more time to repay the loan.
Payroll Tax Abatement
The business component of Social Security Tax deposits can now be delayed by employers from March 27, 2020. Until December 31, 2020. On Form 941, the deferred taxes must be disclosed.
50% of the delayed amount was due by December 31, 2021, to be repaid. By December 31, 2022, the remaining 50% must be paid.
Employer Tax Credit for Retention (ERTC)
The CARES Act includes this strategy. A PPP loan was given to a business that did not initially qualify. This rule is modified by the 2021 Consolidated Appropriations Act to permit businesses to receive benefits from both programs.
Eligibility covers any commercial operations that were entirely or partially halted in 2020 as a result of COVID-19. Also eligible are enterprises with a 50% reduction in gross receipts in the same calendar quarter in 2019.
The ERTC’s expiration date is moved to July 1, 2021, by the Consolidated Appropriations Act 2021. In 2020 and 2021, it raises the credit to a maximum of $14,000 per employee per quarter and alters the credit accessible to 70% of wages up to a quarterly cap of $10,000 per employee.
The employer’s portion of Social Security taxes can calculate the credit. The claim is Form 941, and the refund is in full.
Payroll Taxes on Coronavirus in 2022
Numerous modifications and adjustments made many organizations wary of taking a chance on an error. They passed up the chance to get tax reductions by failing to utilize the programs.
Many firms continue to lose out on this opportunity due to misconceptions about requirements and fear of making a mistake. There is uncertainty over the credit’s eligibility if your company takes out a Personal Payroll Protection (PPP) loan. Then there is the shifting of a January 1, 2022, retroactive deadline to October 1, 2021.
The law permits companies to file Form 940-X to update their Form 940 and perform a look-back of up to three (3) years. The ERC filing date is October 1, 2021. The cutoff date for start-up companies in the recovery is January 1, 2022.
How to Apply
You must submit Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, to apply retrospectively for your ERC. Along with your quarterly federal tax return, you must submit this form.
You must provide documentation demonstrating a decrease in revenue between the quarter you are claiming in 2020 and 2021. And that same quarter in 2019 to demonstrate eligibility. Additionally, you must provide:
- The location of your company
- How many workers are qualified
- Your quarterly payroll tax returns
- Details on earnings paid under the Paycheck Protection Program (PPP) if obtaining a loan for that quarter.
- Detail of employee pay, including date
- A list of your business categories
Contact Your Part Time Accountant to get your questions addressed and to start the employee retention credit application process for the reduction of coronavirus tax relief. We offer a free consultation and adhere strictly to IRS regulations. Please get in touch with us right away!