The New Employment Retention Credit: What It Is and How to Get It
The New Employment Retention Credit is a newly created credit that lets you claim up to $6,000 of your retirement savings as an income tax refund. That's right, if you're over the age of 50 and looking to start a new career, the IRS has just made it easier for you. If you’re enrolled in a qualifying retirement plan such as 401(k), 403(b), 457 or SIMPLE IRA, or traditional IRAs, then you qualify for this credit. This article gives an overview of how the program works and what steps are involved with claiming it.
How to Get It
The first thing you need to do is find out if your current retirement plan qualifies. The New Employment Retention Credit is only available if you're enrolled in a qualifying retirement plan, so be sure to check the IRS list of qualified plans.
After finding out if your plan qualifies, you can follow these steps to claim the credit:
- Sign up for an automatic contribution program with your existing plan provider.
- Begin making contributions to your account as soon as possible. You can do this by using payroll deductions or direct deposits.
- Keep track of your contributions and the date they’re made each year. This will help make it easier when you file taxes next year.
- File your taxes for the current tax year by April 15th, 2022 with Form 1040 or 1040A and Schedule SE (Form 1040).
What Are the Qualifications for Claiming This Credit?
To claim the employment retention credit, you must meet the following qualifications:
-You are enrolled in a qualifying retirement plan
-You have worked for your current employer for at least two years
-You are leaving your job due to economic hardship or involuntary termination
The most common way to qualify for this credit is if you are being laid off or terminated from your job. You can also qualify if you are leaving because of an economic hardship, such as a reduction in force, bankruptcy, or other company closure. The company has to meet certain requirements to receive the credit. If they don't, you may still be eligible for the credit if you meet one of these exceptions. However, it's important that you read all requirements before applying for the credit to make sure that you're eligible.
The Tax Season and the New Credit
The New Employment Retention Credit was introduced as part of the Tax Cuts and Jobs Act. It's a new credit that lets you claim up to $6,000 of your retirement savings as an income tax refund. If you're over the age of 50 and looking to start a new career, this might be just what you need.
There are four steps you need to take in order to qualify for the credit:
- Enroll in a qualifying retirement plan such as 401(k), 403(b), 457 or SIMPLE IRA, or traditional IRAs
- Have at least $2,500 saved in these plans
- Be unemployed for at least 27 weeks (or 56 consecutive days)
- File your taxes with Form 1040 by April 15, 2022
The new credit is designed to help employers retain and train employees, and make it easier for them to be successful. The IRS defines an eligible employer as one that:
- Hires and retains qualified employees
- Provides employees with training
- Provides them with qualifying wages
- Provides them with health care benefits
- Provides them with retirement benefits
- Provides them with child care benefits
- Provides them with parental leave benefits
- Provides them with sick leave benefits
- Provides them with education assistance
- Provides them with transportation benefits
- Provides them with adoption assistance
- Provides them with parental leave benefits.