2023 Employee Retention Credit Updates
The Employee Retention Credit (ERC) is a tax credit that was introduced in the CARES Act in March 2020. It was designed to help small businesses keep their employees on payroll during the COVID-19 pandemic. The credit was later extended and expanded by the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021. Now, the IRS has announced updates to the ERC for 2023.
Changes to the ERC for 2023
The IRS has made several changes to the ERC for 2023. Here are some of the key updates:
Eligibility requirements
The eligibility requirements for the ERC have been updated for 2023. To be eligible for the credit, businesses must have experienced a decline in gross receipts of at least 20% in the first, second, or third quarter of 2023 compared to the same quarter in 2019. Alternatively, businesses can qualify if they experience a decline in gross receipts of at least 20% in the fourth quarter of 2023 compared to the same quarter in 2019.
Amount of the credit
The amount of the ERC has also been updated for 2023. Eligible businesses can now claim a credit of up to 70% of qualified wages paid to employees, up to a maximum of $50,000 per quarter. This is an increase from the previous maximum credit of $7,000 per employee per quarter.
Qualified wages
The definition of qualified wages has been expanded for 2023. In addition to wages paid to employees, businesses can now include certain health plan expenses and expenses related to the maintenance of a group health plan in their calculation of qualified wages.
How to claim the ERC
If you think your business is eligible for the ERC, you can claim the credit on your quarterly employment tax returns. You can also file an amended employment tax return to claim the credit for previous quarters.
To claim the ERC, you will need to provide documentation to show that you meet the eligibility requirements and that you have paid qualified wages to your employees. This documentation may include payroll records, financial statements, and other relevant documents.
Start The Process Here
Conclusion
The updates to the ERC for 2023 are designed to help small businesses keep their employees on payroll during a time of economic uncertainty. If you think your business may be eligible for the credit, it's important to consult with a tax professional to ensure that you meet all of the eligibility requirements and that you are claiming the credit correctly.
