Amid the turmoil of the COVID-19 pandemic, North Dakota’s businesses were forced into mandatory closure to prevent the spread of the virus.
For those businesses that continued to retain employees on their books and pay them, the Employee Retention Credit (ERC) is now available for those that meet the qualification criteria.
But, do you know for sure if your business qualifies? If so, how much are you entitled to?
We’ll cover everything you need to know about your North Dakota Employee Retention Credit claim in this guide.
Alternatively, go ahead and check out how our ERC attorneys can help you with your claim!
What is the Employee Retention Credit in North Dakota?
The Employee Retention Credit in North Dakota is a refundable tax credit, aiding COVID-19-impacted businesses in North Dakota and nationwide. It covers 70% of qualified wages paid to employees from March 13, 2020, through December 31, 2021, maxing at $7,000 per employee per quarter.
Eligibility for the North Dakota Employee Retention Credit
North Dakota employers, including tax-exempt organizations, can qualify for the North Dakota employee retention credit if they conducted business in 2020 and faced either of these ERC qualifications:
- A full or partial suspension of their business due to government directives restricting commerce, travel, or gatherings amid the COVID-19 pandemic, or,
- A substantial decrease in gross receipts.
The concept of a full or partial business shutdown is relatable to many, with some firms in North Dakota still grappling with ongoing closures in this financial uncertainty.
For businesses operating at a loss, it's essential to calculate gross receipts to meet the criteria for North Dakota Employee Retention Credit (ERC) eligibility.
Calculating the North Dakota ERC grant
The ERC calculation is a mix of both simplicity and complexity. Precise calculations of the ERC are crucial to avoid issues, particularly because ERC rules have evolved, with distinctions between 2020 and 2021 computations.
To compute the North Dakota ERTC for 2021, a business in North Dakota must:
- Meet specified financial setback criteria,
- Have a workforce of fewer than 500 employees,
- Identify eligible wages, and
- Submit the return promptly.
Regarding ERTC credit limits, eligible wages for North Dakota businesses are capped at $10,000 per employee per quarter, with the credit calculated at 70% of these eligible wages.
For claims relating to 2020, similar principles apply, but the calculation rate is 50% instead of 70%. Additionally, North Dakota companies with over 100 employees in 2020 do not qualify for the ERC.
Applying for the ERC in the Peace Garden State
As part of the ERC application, eligible employers will need to report their total qualified wages and associated health insurance costs for each quarter on their quarterly employment tax returns, typically using Form 941 starting from the second quarter.
Notably, the ERC application offsets the employer's share of social security tax, and any excess is refundable under standard protocols.
The refund-ability feature of this legislation is especially beneficial for North Dakota companies grappling with the substantial impact of COVID-19.
Claiming PPP & the ERC together
The Consolidated Appropriations (CARES) Act brought about changes to the original terms of PPP loans. The IRS, acknowledging these changes, issued a news release permitting deductions for eligible expenses when they lead to the forgiveness of a loan under the Paycheck Protection Program (PPP).
Revisions to the CARES Act guidance clarified that the exclusion of forgiven PPP loan amounts from gross income does not result in denied deductions, reduced tax attributes, or basis reductions.
The prior guidance disallowing deductions for expenses potentially leading to loan forgiveness is now outdated. Consequently, North Dakota businesses can now simultaneously claim the ERC and PPP benefits. However, there are potential pitfalls associated with this, and careful planning is advised.
Guidance for nonprofits in North Dakota
The ERC for nonprofits, which includes churches, follows a similar process to regular businesses.
Yet, as in many regions, understanding eligibility and navigating these regulations can be a complex task for North Dakota nonprofits.
Nonprofit entities must satisfy specific eligibility criteria, such as the government mandate test and the gross receipts test, to qualify for these credits.
For nonprofits, claiming the Employee Retention Credit (ERC for nonprofits) involves filing Form 941-X and reporting the credit amount on Form 990. The final credit amount hinges on factors like qualified wages and the number of employees on their payroll.
Is ERC taxable in North Dakota?
No, the ERC isn't taxable in North Dakota since it’s not classed as income but is a tax credit. While it doesn't count as taxable income, it affects payroll deductions, potentially impacting profits. However, it does impact payroll deductions, which you need to be aware of.
Check out our is ERC taxable income guide for a more in-depth look at this and how it might impact your tax filing and reporting.
Navigating ERC audits
In North Dakota, like anywhere else, it's crucial to correctly claim the Employee Retention Tax Credit while adhering to the rules and regulations outlined by the Internal Revenue Service.
Although the IRS has affirmed that an ERC audit can happen, there are preemptive measures you can take to minimize the likelihood of an audit and also be ready if your North Dakota-based business faces one.
In our complete ERC audit guide, we delve into key aspects, including:
- Preventing an audit in the first place.
- Understanding the statute of limitations for the ERC audit.
- Knowing what steps to take if you receive notification of an audit.
Scams to be aware of
Sadly, scams related to the Employee Retention Credit have been on the rise, with them employing various tactics to deceive businesses and exploit the ERC program.
The IRS has issued warnings about these scams, emphasizing the importance of adhering to tax regulations and maintaining vigilance when engaging with third-party entities.
While the ERC itself is a legitimate refundable tax credit, it's imperative to be aware of these prevalent scams:
- Identity theft: They target North Dakota businesses ineligible for the ERC, steal sensitive information, and use stolen identities to falsely apply for the credit.
- Collections: Fraudsters file fraudulent ERC claims and retain a significant portion of the credit.
- Phone calls: Scammers contact employers in North Dakota, making false ERC eligibility claims, and may charge excessive fees for unnecessary services, even when the business qualifies for the credit.
To shield against Employee Retention Credit scams, we always advise that you ONLY collaborate with trusted tax professionals, verify eligibility yourself, and exercise caution when receiving unsolicited advice or encountering unrealistic promises.
These precautions help guard against fraud, ensure compliance, and protect your business from falling foul of these scams.
How Brotman Law can help
With our wealth of experience, we can put you in touch with an ERC tax attorney to help you understand ERC eligibility, optimize claims, and guard against potential scams.
We're committed to helping North Dakota businesses maximize the benefits of the Employee Retention Credit program.
Reach out today to benefit from the dedicated support of our skilled ERC tax attorney team, ensuring your North Dakota business navigates this landscape effectively.
Certainly, the Employee Retention Tax Credit (ERTC) provides significant financial relief for businesses and nonprofits in North Dakota in managing the fallout of the COVID-19 pandemic.
However, understanding eligibility criteria and determining qualified wages can be complex, particularly depending on the size of the employer.
Regrettably, North Dakota, like elsewhere, faces ongoing scams targeting those in need.
To effectively overcome these challenges in North Dakota, reach out to us. Our tailored assistance can help you assess eligibility, maximize your credit, and safeguard your business from potential fraudulent activities.
The US states we support through the ERC