Am I eligible for the Employee Retention Credit(ERC)?

The Employee Retention Credit (ERC) provides significant financial relief for businesses that experienced revenue losses due to COVID-19. Initially created by Congress as a part of the CARES Act, in March 2020, the ERC has been expanded twice to help more struggling companies reduce their federal tax bill. To take advantage of the ERC, eligible businesses can file Form 941-X for qualifying wages paid to full-time employees from March 13, 2020, to December 31, 2021, and claim the credit retroactively. The ERC can be claimed up to three years after the original payroll taxes were due, meaning that the 2020 ERTC can be claimed until April 15, 2024, and the 2021 ERTC can be claimed until April 15, 2025.

What is the ERC?

The ERC is a credit that incentivized businesses of all sizes to retain their employees during COVID-19, a time of economic hardship. Eligible companies can receive a refund in the form of a grant that can return up to $26,000 per employee depending on wages, health expense and other personal costs business owners have already previously paid through the qualifying period. However, the ERC has changed over time, so it is important to communicate with a professional who is up to date with the eligibility criteria.

Who can qualify for an ERC?

To qualify for the ERC, private companies (including nonprofits) must meet one of the following criteria: their business was ordered by a local government or municipality to fully or partially shut down or modify business operations in some fashion such as adjusting customer capacity limits, limiting access to the business footprint, a reduction in operating hours, or experienced supply chain disruptions. The second way to qualify would be to show a decline in gross receipts during the calendar quarters in 2020 and 2021 as compared to 2019.  

Each year has different qualifying criteria (refund amounts, # of employees that qualify, overlapping programs, and more), so engaging a professional to make the proper calculations is critical for sizing your ERC claim.

What if I already received the PPP, do I still qualify?

Initially, the ERC was not available to businesses that received a PPP loan, but the rule was changed. So even though a business received the PPP loan, they can now qualify for the ERC as well. However, with every change there are nuances like a business cannot claim the ERC against wages paid with funds received from the PPP loan.in other words, no double dipping.

Ready to file an ERC claim? What comes next?

Businesses can still claim retroactive ERC refunds by filing Form 941-X. This form can be used to adjust employment taxes filed within three years of the original return or two years from the date the employer paid the tax. Therefore, eligible businesses that did not initially claim their ERC could potentially do so through 2024, depending on when they filed or paid their business taxes. However, employers should note that this retroactive refund is only available for the 2020 tax year and the first three quarters of the 2021 tax year. It does not apply for Q4 of 2021 nor for the 2022 tax year and beyond.

Get Started on you ERC refund today

Navigating the guidelines, filling out the required paperwork, and making the proper calculations can be a bit demanding and overwhelming. It also may require the verification of many different documents proving your business qualifications for the credit. But don’t get too worked up, because engaging with the right tax professional or company that specializes in handling ERC claims is a great place to start.

If you haven’t filed your claim yet, contact us about your situation and our team can assist you through the entire process. We work with licensed CPAs and Tax Attorneys with a national footprint that can help you with the claim process. Best of all, they back up their work with audit support.

Lastly, it is helpful to know that many ERC refund claims are taking the government up to 12months to process.  Learn more about your ERC Financing Options here, where you can accelerate access to your anticipated refund sooner.

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Footnote

This post offers professional opinion and should not be construed as professional or legal advice. Please consult a licensed professional about your particular business situation.

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