The Consolidated Appropriations Act of 2021 was enacted to provide relief to individuals and businesses as the world grappled with a healthcare emergency. This Act is an expansion of the Employee Retention Credit (ERC) that was introduced under the CARES Act. Due to the complex nature of the policy, there has been a lot of confusion regarding who is eligible for the ERC payroll retention credit. The questions listed below may help determine your eligibility.
1- What businesses or employers are eligible for the ERC?
To be eligible for the Employee Retention Credits, the organization must be carrying on business in 2020 and meet either of the following criteria
- Complete or partial suspension due to a government order
- Significant decline in gross receipts
2- How is a ‘significant decline’ in gross receipts defined?
- ERC 2020- During this period, a ‘significant decline’ implies a quarterly revenue decline of more than 50%. This comparison is based on the revenue generated in the previous year.
- ERC 2021- For companies applying for ERC 2021, a quarterly revenue decline of more than 20% should be noted. This decline is also compared to the revenue from 2019.
- For companies that became operational in 2019, the period (quarter) during which the business started functioning is considered the basis for determining quarterly revenue decline until the company reaches one year of operations.
3- Who can the business claim ERC for?
Small employers can claim ERC on all employee wages. For others, this credit can only be claimed on the salaries paid to employees for not working.
In addition, wages paid to certain related parties and owners are limited, and family members such as children, siblings, parents, and grandparents are ineligible for this credit. This is also detailed by the IRS under their FAQ section, according to which the following entities are ineligible for ERC-
- A brother or sister
- A child or grandchild
- Step-brother or step-sister
- The father, mother, or an ancestor of either
- A stepfather or stepmother
- A niece or nephew
- An aunt or an uncle
- Individuals the employee is related to by marriage
4- How is a ‘small employer’ defined under the ERC policy?
To gain retention credits under the 2020 ERC rules, a ‘small employer’ was defined as having 100 or fewer full-time equivalents (FTE) on your payroll. Under 2021 ERC, this definition was extended to include up to 500 FTEs. The comparison in both scenarios is 2019 employment.
In any case, a full-time employee is defined as an employee who, on average, works at least 30 hours per week or at least 130 hours of service during a particular month.
5- What are the wages eligible for ERC?
Qualified wages under this rule include gross wages and employer health costs. For 2020, the qualified wages were capped at $10,000 per year per employee, and this cap was extended under the 2021 rules to $10,000 per quarter per employee.
Additionally, wages that were used to claim ERC could not be used for other credits such as Research & Development Credit (Section 41), Work Opportunity Tax Credit (Section 51), Employer Wage Credit for Active Duty Members (Section 45P), Indian Employment Credit (Section 45A), Employer Credit for Paid Family and Medical Leave (Section 45S), and Empowerment Zone Employment Credit (Section 1396).
6- How much ERC can be earned per year (2020 and 2021)?
According to the rules for ERC in 2020, the credit amount was 50% for qualified wages up to $10,000 for the entire year. The maximum credit employers earned during this time was $5,000 per employee.
With the cap increase in 2021, the credit amount rose to 70% of qualified wages up to $10,000 each quarter. However, this credit only applied to the first two quarters of the year that ended on June 30, 2021. Thus, according to this rule, employers qualified for up to $14,000 credit per employee.
7- How is ERC claimed?
The ERC should not be considered an income tax credit. Rather, it is a payroll tax credit that directly reflects on Form 941. For individuals who still have not claimed the ERC tax credit in 2023, it can be claimed retroactively in the form of a refund from the IRS by filling out Form 941-X (Modified Employer’s Quarterly Federal Tax Returns or Request for Refund) for the applicable period. This form records your qualified earnings and accompanying credits for each calendar quarter that you qualify for.
8- How to claim credit for payroll retention?
The Employee Retention Tax Credit (ERTC) is a tax credit for companies that lost income in 2020-2021 due to a public health emergency. Under this rule, eligible employers can get up to $7,000 for each employee per quarter for four quarters, bringing it to $28,000 per employee. The credits may be claimed by reducing employment tax contributions by the projected credit amount.
The initial date for the ERTC retroactive period was January 1, 2022, but was pushed back to October 1, 2021. Although it offers multiple benefits to organizations, only a few companies applied for these credits. However, those who did not apply for credit earlier can claim a retroactive refund now. This applies for up to three years after the initial filing date.
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Your guide to getting FHA loan approvals
Read moreA Federal Housing Administration (FHA) loan is a type of mortgage which is insured by the FHA and is considered one of the most affordable and fastest loans to procure.
Simply put, the borrower needs to be approved by the FHA to get this loan. You may then look for different mortgage rates with different FHA-approved lenders. There are plenty of portals which may help you get fast quotes and you may subsequently take the process ahead with any lender whose rates you have found affordable.
Important guidelines to get an FHA loan approval
Discussed below are a few important aspects to keep in mind while applying for an FHA loan.Credit score
The credit score requirement to get an FHA loan approval is not stringent. The minimum eligible credit score for the same is 580. Even if you do not have a credit history, your lender will need to evaluate your eligibility, based on a non-traditional merged credit. Some borrowers may require a score of 640-680 to be eligible for this loan.While this is a guideline set, many lenders also give a loan to people with a credit score of at least 500.
Debt to income ratio
The debt to income ratio is a critical guideline followed by lenders to evaluate the eligibility of a borrower. It is a way in which lenders (even mortgage lenders) calculate a borrower’s ability to repay the debts, considering their regular incomes. The acceptable limit of this ratio is 31:43 to get an FHA loan approval.Mortgage insurance
Even though getting an approval for an FHA loan seems fairly easy, the real challenge arises in getting two types of mortgage insurances as prerequisites. One insurance needs to be paid fully while the other has to have a provision of being paid in monthly installments.Down payment
The minimum down payment required for an FHA loan approval is 3.5%. While the standard rate for down payment runs at 20%, the 3.5% comes as a great relief for borrowers who cannot afford such a high amount.Other important areas
A lender will look into your employment history, lawful residency in the US, as well as a valid Social Security number (SSN). You would also require to have an appraisal for the property from a verified FHA-approved appraiser.The other requirements differ from lender to lender, and it is always advisable to gather full information about your verified FHA loan lender before applying for a loan.
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3 ways SMA patients and caregivers can maintain a healthy relationship
Read moreThe relationship between a person diagnosed with spinal muscular atrophy (SMA) and their caregiver is a two-way street. It is important to remember that both the patient and caregiver have their individual needs that should be communicated clearly. Irrespective of whether the primary caregiver is a parent, friend, or someone who has been hired to take care of the SMA patient, there are a few important things to consider for a healthy relationship between them. Below are three tips for SMA patients to maintain a healthy relationship with their caregivers-
- Informing the caregiver in advance about any schedule changes
SMA patients should remember that their caregivers, whether family, friends or professional caregivers, have their own schedules and needs. One needs to ensure that they don’t make any last-minute changes without informing the caregiver well in advance. A caregiver plans everything according to the SMA patient’s schedule, and any sudden changes might cause problems with the caregiver’s schedule and routine. It is important to remember that the caregiver is likely to have other jobs, people to meet, and other personal errands of their own. Hence, it is essential to inform the caregiver in advance if there are any changes to one’s schedule.
- Conveying one’s needs clearly
If an SMA patient is hiring someone through an agency or via the Internet, it is vital to know that the caregiver has probably had clients with a wide range of needs, levels of independence, and abilities. Hence, it is necessary for the patient to inform the caregiver about what their specific needs are, what tasks they can do, and what tasks they cannot perform. The best way that a caregiver will be able to help a patient properly and cater to all their needs is by just communicating with them. If one is used to doing certain things in a particular manner, let the caregiver know that beforehand so that they are able to do their job thoroughly by keeping their patient’s needs in mind.
- It is okay to have disagreements with the caregiver
When the caregiver is a friend or family member, fights and arguments are inevitable. However, when one has a fight, a confusion, a misunderstanding, or whether there is a simple disagreement with one’s caregiver, one needs to ensure that this tension does not last. It is important to communicate openly and work together towards solving the problem.
- Informing the caregiver in advance about any schedule changes