Businesses faced severe consequences during the Covid 19 pandemic; sales declined to zero causing massive losses. After the businesses reopened, it became challenging to continue with the same number of employees. Every business started to fire its employees. Due to the unavailability of funds to pay their salaries until the employee retention credit scheme was announced. The employee retention credit scheme has helped small and mid-sized businesses to retain their employees. However, many businesses still need to apply for this employee tax refund. Applying for this tax is relatively easy, but certain conditions exist to be eligible for that tax. Nevertheless, if any business remembers the following things before applying for the retention credit explained in this article, it will more likely get a refund.
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Small or Mid Sized business
A business needs to fall in the category of small or mid-sized businesses before applying for this tax back scheme. The big companies are already in profit and have the potential to face pandemics and retain employees. Contrary to this, small businesses are growing and don’t have the potential to face severe conditions. Therefore, big companies can still apply for this scheme, but they will only get fewer refunds than small businesses. On the other hand, small and mid-sized businesses are highly encouraged to apply for this scheme and get benefits from the government’s offers.
Shutdown during the pandemic
The business which faced shutdown, either complete or partial, are eligible to get this credit. However, businesses that have nothing to do with Covid-19 will not be facilitated.
Internet businesses like blogging, vlogging, and consultancy services are less likely to get affected by the pandemic. Such Businesses face no problem while paying an employee or retaining employees in any situation. However, outdoor businesses like hotels, stores, salons, dentists, and other shops are highly affected by Covid-19. Therefore if you have any outdoor business that faced shutdown during the pandemic, you are eligible to apply for this retention credit.
Faced Sales Decline
The businesses must show proof of sales declines during the shutdown period to claim this credit. All the businesses that faced severe consequences during the pandemic are bound to present sales and gross income statements from month to month before the CRA-Canada Revenue Agency. The businesses also have to show t4 tax information slips. To notify how much loss they are facing and how many company employees are on the verge of getting fired.
If you own a business that has been through the conditions mentioned above, claim your credit without further a do. However, the amount of retention credit differs from business to business depending on the number of employees and sales and income statement. Regarding simplifying things, we explain the criteria of retention credit estimation.
Number of Employees
As stated earlier, retention credit is explicitly for small businesses; therefore, companies having several employees between 5 to 100 are eligible. Therefore, If an eligible employer pays wages to employees in a quarter up to $10000 in reference to the tax t4 slips, they can get a refund of up to 50%. However, a company having between 5 to 100 employees can get a refund of as low as $25000 and as high as $130000. Further, if a company has employees between 100-500 are also eligible for this scheme. They can get a credit of as low as $2.5 million and as high as $13millions, subject to their payroll tax is paid on time.
The employee retention credit is not available on all the wages paid since the arrival of covid 19; instead, for a particular duration. All the wages paid by an eligible employer to its employees from mid-March 2020 to June 2021 fall under the eligibility criteria of the retention credit scheme. The wages paid later than the mentioned duration will not be able to avail credit retention. However, the businesses that did not apply for this scheme during this period don’t need to get worried. According to the Coronavirus Aid, Relief and Economic Security Act- CARES, businesses will be able to claim the retention credit till three years past the retention credit scheme’s last date.
The government’s employee retention credit is an appreciable step to uplift small and struggling businesses. Some business owners need help applying for Form 7200. Accounting consultancies are helpful in this regard; they have helped numerous businesses claim this credit. However, approaching the best consultancy is in itself a problem, but not anymore, as long as there is MBE Accounting.
MBE Accounting, a financial accounting consultancy service, maintains a portfolio of serving numerous businesses, whether big or small. If You need services regarding T4, T4A, Bookkeeping, Tax returns, payment payroll, corporate registration, corporate renewal, or audit, MBE is there. MBE Accounting deals with all sorts of services related to financial accounting. Unlike other consultancies, MBE has high client retention. MBE aims to help businesses in dealing with legal matters regarding accounting. MBE Accounting is currently operating across Canada but vows to expand globally. MBE believes in nothing but the quality of work. Whether you search “tax return canada,” “canada t4 slips”, “audit canada,” or “t4 revenue canada”, you will get MBE accounting as a result on the first page of every search engine.
The pandemic has caused lots of damage to people and their income streams, be it a job, self-employment or a business. Plenty of people who used to own businesses have gone bankrupt, and plenty of people who were previously employed have become jobless. In this regard, governments have announced employee retention credit to uplift businesses struck by covid so that no more people go bankrupt and no more people become jobless. If you are a business owner and still need to apply for this credit, go and claim it immediately.