Page 31 - GS220201

Education

is different as well. Business owners and related
individuals (either by blood or marriage) cannot have
their wages included as an ERTC eligible wage expense
in the credit.

The tax credit is also only available to businesses
that have W-2 employees on the payroll and that
satisfy the IRS's either/or rule. Either the business
had operations that were partially or fully suspended
due to government orders related to COVID-19, or the
business had a significant decline in gross receipts
compared to 2019.

Affected small businesses could claim up to $5,000 per
employee in 2020, and $21,000 per employee in 2021.
Companies that qualify for both years of the ERTC
could receive up to $26,000 per employee. The credit
is limited to businesses that have less than 500 full-
time employees, and the funds can be applied against
quarterly payroll tax liability. For small businesses
that have already paid their taxes, the ERTC will be
received as a refund of the employer's portion of the
FICA tax.
Using a PPP loan and the ERTC together

Prior to passage of the Relief Act in late December 2020,
a business that obtained a PPP loan could not claim the
ERTC. The Relief Act changed this rule retroactively.
Now businesses that received a PPP loan have the
opportunity to claim the ERTC for qualified wages.

To claim the credit, taxpayers will need to file Form
941X to amend their quarterly payroll tax filings so
that they can receive their refund. Companies cannot
count the wages they used the PPP loan on in their
calculations for the ERTC.
As of the signing of the Infrastructure Bill in 2021, the
ERTC will be available for affected businesses for up to
five years after they filed their quarterly payroll taxes
for 2020 or 2021. Any small business that was seriously
affected by the last two years of pandemic uncertainty
still has time to apply for the ERTC.
The Federal Reserve Bank of Cleveland reported in
PPP Loans & State-level Employment Growth that PPP
loans lessened employment loss, especially when
companies were able to take out loans earlier in the
pandemic. As the economy continues to recover, small
businesses that took out PPP loans can still maximize
their COVID relief funds by applying for the ERTC.
This valuable credit will help them bridge the gap
between pre-pandemic and post-pandemic life.
Tyler Kem is co-founder and president of Strike Tax Advisory, which
helps businesses discover and claim government-provided tax cred-
its and incentives available to them. Strike Tax helps SMBs compete
more efficiently while keeping jobs in the United States. For more
information, visit www.striketax.com.

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