The Employee Retention Credit (ERC) is a valuable tax credit offered by the IRS to assist small businesses in retaining their employees during challenging economic conditions. As businesses navigate the eligibility requirements and application process for the ERC, one question that often arises is whether the credit can be claimed for employees who are family members. Let’s take a closer look at the rules surrounding this issue.

You might enjoy reading the ERC FAQ.

Who Qualifies as a Family Member for ERC Purposes?

For the purposes of the ERC, a family member is generally defined as a spouse, child, parent, or sibling of the business owner. In some cases, the definition may be expanded to include other relatives as well.

Can a Business Claim the ERC for Family Members?

The short answer is yes, a business can claim the ERC for family members who meet the eligibility criteria. However, there are some important considerations to keep in mind:

1. The employee must meet the eligibility criteria: To claim the ERC for a family member, the employee must meet the same eligibility criteria as any other employee. This includes meeting the criteria for wages paid and hours worked, as well as any other eligibility requirements.
2. The business owner cannot claim the credit for themselves: If the business owner is also the family member employee, they cannot claim the ERC for themselves. However, they may be able to claim the credit for other employees who are not family members.
3. The credit may be limited for family members of more-than-50% owners: If the business owner owns more than 50% of the business, there may be limitations on claiming the credit for family members. Specifically, the credit may be limited to 70% of qualified wages paid to family members.
4. Documentation is important: As with any other employee, it’s important to maintain documentation to support the ERC claim for family members. This may include payroll records, employment contracts, and other relevant documents.

Must look at the ERTC FAQ to better comprehend it!

Conclusion

Businesses can claim the ERC for family members who meet the eligibility criteria, subject to certain limitations. As with any other employee, it’s important to maintain documentation to support the ERC claim for family members. If you have any questions or concerns about claiming the ERC for family members, it’s a good idea to consult with a tax professional.