Core Elements In Employee Retention Credit for Construction Companies - The Inside Track

Despite its potential benefits awareness of the ERTC in small businesses is only about 30%, and it is likely to be even lower among construction contractors. If you qualify for the ERC in one quarter, you'll automatically qualify for it in the next one. You'll still be eligible for the credit after the quarter in that you record 80% (i.e. exceed the 20% reduction threshold). The Employee Retention Credit is one of the most important tax benefits available for small and medium businesses, as well as tax-exempt entities. It helps to keep doors open and employees on pay during difficult economic times. The ERTC can be a complicated provision. Eligibility for credit may vary depending on the employer's particular facts.

What is the employee retention credit?

The IRS offers a tax incentive called the employee retention credit. It was established under the CARES Act of February 2020. The Employee Retention Tax credit was then extended and enlarged by the Relief Act of 1920 and the American Rescue Plan Act of 1921. This is a tax credit that pays employers back part of their employee's wages during COVID-19 Lockdown in the years 2020-2021. This is not considered a loan and doesn't need to be repaid.

The original extension of the ERTC was to extend it to the end of 2021. However, the act was retroactively repealed in the fourth quarter following passage of the Infrastructure Investment and Jobs Act. It will expire on September 30. Due to the delay in passing IIJA construction firms already claiming credit in Oct 2021 face a possible tax penalty when filing their 2021 tax returns. RSM US Alliance Members have access through RSM US LLP to RSM International Resources, but are not members of RSM International. Visit rsmus.com/aboutus to find out more about RSM US LLP as well as RSM International.

Details Of Employee Retention Tax Credit For Construction Companies

Construction environment is constantly changing. Fortunately employee retention tax credit, economic relief measures are still available through the American Rescue Plan Act (Arabic Rescue Plan Act) of 2021. Construction companies could be eligible if their capacity ERTC tax credit was reduced or closed due to government closures. A contractor must be a qualified employer to receive an ERTC. This means that they must be a controlled group as defined by Internal Revenue Code Section 52 (greater then 50% ownership test) or Section414 on an aggregated basis.

Great news for owners of construction and home improvement service companies that were impacted by Covid-19. Your business could be eligible for the #employeeretentioncredit https://vimeopro.com/cryptoeducation/employee-retention-tax-credit-for-construction-and-home-improvement-service-companies/video/769930034

Watch this video to find out! #constructionindustry https://t.co/pUTEh0RB3s

— CryptoCrisps (🐝,🐝) 9452 (@CryptoCrispsBee) November 11, 2022

Additional thresholds are included in the CAA that determine which wages an employer can claim the ERTC. For calendar year 2020, employers with more than 100 employees can only claim credit for wages ERTC tax credit home improvement businesses paid to employees who were not actively providing services (e.g., were furloughed). Employers with less than 100 or 500 employees may claim a credit for all wages paid to employees, regardless if the employees were furloughed.

Getting Your employee retention credit for construction companies On A Break

Employers can claim the ERC as a tax credit that is fully refundable. It is equal to 50 percent of the eligible wages that they pay their employees. This credit applies to qualified wage payments made after March 12, 2020 but before January 1, 20,21. The maximum amount of qualified wages that can be taken into account for any employee in any calendar quarter is $10,000. This means that the maximum credit for qualified wage payments to any employee is $5,000.

Besides having a much larger credit available, for 2021, a business qualifies on less stringent rules. The business must demonstrate a decrease of over 20% in gross receipts from a calendar quarter in 2019 compared to the same calendar quarter in 2021. Alternatives include using the quarter immediately before to qualify. A business that is applying for qualification for the second quarter 2021 can take a 20% decline in the fourth trimestre of 2020, or 20% for the 1st quarter 2021, compared to 2019. The decrease does not have be related to any particular pandemic that caused a loss in gross receipts.