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employee retention tax credit
strengthening your team
The Employee Retention Credit (ERC) is a new tax credit under the CARES Act. Business owners may not realize that there is potential tax credit for employers who were impacted by COVID-19. This refundable tax credit is a relief measure for businesses that encourages them to keep employees on their payroll.
The ERC legislation was expanded under the Consolidated Appropriations Act which took effect on January 1, 2021. As a result of this expansion, all employers who took PPP loans could be eligible for the ERTC for 2020 and 2021.
how smith cpa’s can help
- Determine if your business qualifies as an ERC eligible employer.
- Determine if qualified wages were paid to employees during relevant time periods.
- Calculated your ERC for all applicable financial quarters during 2020 and 2021.
- Identify interactions between your PPP loans and other credits.
- Prepare a summary report to substantiate your credit per employee.
- Prepare draft forms 941-X, if applicable, to provide to your CPA or payroll provider.
How to Claim the ERC
- Under the ERC, an eligible employer may claim a payroll tax credit to offset all federal employment tax paid from March 13, 2020 until September 30, 2021.
- Eligible employers include those who experience a suspension of activity due to a governmental order as a result of COVID-19 OR those who experienced a significant decline in gross receipts: 50%+ for 2020 and 20%+ for 2021.
- Employers may claim up to $5,000 per employee for all of 2020 and up to $7,000 per employee per quarter during 2021.
- Weren’t eligible to claim in 2020? You may be eligible now! This credit can be claimed retroactively.
Frequently Asked Questions
Why should I hire a CPA?
CPAs have extensive knowledge and expertise in accounting, taxation, and financial planning. Hiring a CPA can ensure accurate financial reporting, compliance with tax laws, and strategic financial guidance.
What services do CPAs provide?
CPAs offer a variety of services, including tax preparation, tax planning and tax strategy, audit and assurance, financial planning, business consulting, and more.
How can a CPA help my business?
A CPA can assist your business with financial planning, budgeting, tax compliance, and strategic decision-making. Their expertise will contribute to the overall financial health and success of your business.
What is the difference between a CPA and an accountant?
While all CPAs are accountants, not all accountants are CPAs. CPAs have met specific educational and licensing requirements, including passing the CPA exam. CPAs typically have a broader skill set and can provide a wider range of services.
How much does it cost to hire a CPA?
The cost of hiring a CPA can vary based on the services needed, the complexity of the work, and the CPA’s experience.
Do I need a CPA for personal tax preparation?
While it’s not mandatory to hire a CPA for personal tax preparation, their expertise can be valuable in maximizing deductions, ensuring compliance with tax laws, and providing strategic tax planning.
How often should I meet with my CPA?
The frequency of meetings with your CPA may depend on your specific needs and the complexity of your financial situation. Regular check-ins and for significant financial events, are recommended.
Can a CPA or IRS Enrolled Agent help with IRS audits?
Yes, CPAs and IRS Enrolled Agents are equipped to assist individuals and businesses facing IRS audits. They can help gather necessary documentation, represent you before the IRS, and navigate the audit process.