During the pandemic Congress created a tax break to help businesses that were having a hard time which is known as the Employee Retention Tax Credit (ERTC). However, not many businesses took advantage of it and the bipartisan infrastructure bill would bring an end to the tax break.
One thing that this has shown us is how difficult and confusing it has been for small business owners to apply and get this relief money. The paperwork and rules are complicated and confusing making accessing these tax cuts near impossible to claim. Even lawmakers have struggled to deliver this relief which explains the Senate’s quick move to end the tax cuts now.
The ERTC came in the form of a tax credit, which was worth up to $28,000 for every qualified employee that remained on payroll during 2021. However, the Senate passed legislation on August 10th that would end the credit on September 30th, but the House must also pass it and is currently in recess until September 20th. The tax credit is currently available through the end of the year.
According to the Joint Committee on Taxation, they estimate around $550 billion of new spending is planned for things such as energy infrastructure and transportation. Ending the tax credit early would save around $8.2 billion which is not a lot in comparison, but is a start to help cover some of that cost.
According to some tax advisors, these tax cuts were put in place with the key hope to help small business owners that were struggling through the pandemic. However, with the constant changing qualifications and lack of awareness, they now see that they are only benefiting larger companies which was not the intent. Some larger companies that have benefited from these tax credits in the form of millions of dollars are Spirit Airlines Inc. and Best Buy Co. Inc.
While the employee retention tax credit was originally created under the CARES Act in March 2020, it has since undergone amendments in December 2020 and again in March of 2021. This is because it originally was created for businesses that did not qualify for PPP loans and did not attract much attention. Later, it was updated to open it to more businesses even if they had applied for and received PPP loans already.
Many small businesses have found the process of applying for the credit overwhelming, and the more that it is changed, the more confusing it is for them who are trying desperately to figure it out. Current COO (Chief Operating Officer) Andrew Jordan of a bookkeeping and accounting company, FinancePal Business services LLP, said that the constant attempt to fix and finetune the program has been the biggest downfall of the legislation.
He also said that while it was an attempt to extend help, making the tax credit last to the end of the year wouldn’t do any good because the businesses that qualify for it are becoming less and less. In his words, “It’s hard to maintain business down for that long; you’re either bouncing back or you’re not.”
However, we all know that the Delta Variant is causing a new wave of cases throughout the country and therefore causing businesses to have problems again. Since this is going on, there is the possibility that in the last quarter of the year, some companies that would otherwise be eligible would not be able to apply for the employee retention tax credit if it ended sooner.
Do you have a small business that has been struggling during the pandemic? Maybe you have even looked into applying for the employee retention tax credit but can’t figure out if you qualify or how to apply. We are here to help! Contact us for a quote and learn all of the services available to help you and your small business. We can be reached at 310-534-5577 or firstname.lastname@example.org.
Find more information from the source of this article here: https://www.accountingtoday.com/articles/senate-plans-to-end-business-tax-break-that-few-companies-claimed?position=editorial_3&campaignname=ACT%20Tax%20Practice-08032021&utm_source=newsletter&utm_medium=email&utm_campaign=V2_ACT_TaxProToday_20210503%2B%27-%27%2B08032021&bt_ee=JPt9QBu8m%2FCvAJ3uHNhOoHaTZr3kuerv2xTfC5KA9rawRUWoROUTKqLYypXBjaTp&bt_ts=1628006664815&fbclid=IwAR08TVWdmyvDqETAK8rFEQw5Dd4CWF3B_tDgCPZxgb4uqUP3mV3GF-UdSR4