What is the Employee Retention Credit?
The Employee Retention Tax Credit (ERC) is a refundable tax incentive created to reward business owners for retaining employees throughout the COVID-19 pandemic. The ERC is available to both small- and mid-sized businesses. It was signed into law on March 27, 2020, as part of the CARES Act.
Business owners impacted by COVID-19 can claim up to $5,000 in refundable tax credits for each employee on their payroll in 2020 and up to a $7,000 credit per quarter (excluding Q4) for each employee in 2021.
You Can Claim The Employee Retention Credit If…
You were forced to reduce capacity, certain operations, hours, or completely shut down at any point in 2020 or 2021 from COVID-19 related government orders.
Or your 2021 revenue dropped by more than 20% compared to the same quarter in 2019 or the immediately preceding quarter.
Or you made 50% less revenue in a specific quarter in 2020 than you did in the same quarter in 2019.
Or you began operations on or after February 15, 2020 and your annual gross receipts do not exceed $1 million.
Businesses that received PPP loans in 2020 or 2021 can still claim the ERC!
How Do You Claim The Employee Retention Credit?
1st: Simply apply online
2nd: We calculate your maximum credit eligibility & provide you with a risk-free, cost-free tax credit refund estimate.
3rd: We file and submit all the necessary IRS forms and documentation on your behalf.
4th: You receive a refund directly from the IRS - no need to take any further action.
“The ERC Funding team was excellent. They were thorough and diligent in their work, they maximized my refund and they also made sure that all was done within the legal guidelines. I highly recommend them”
– Mahesh Moorjani
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– Maurizio Cocchi
“My questions were answered & they helped me navigate the unchartered waters of the ERC program. Very pleased with results & I am a bit on the hard side to please. This group is good. If you are considering an ERC, call them.”
– Michael Sumner
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What is the ERC?ERC is a stimulus program designed to help those businesses that were able to retain their employees during the Covid-19 pandemic. Established by the CARES Act, it is a refundable tax credit - a grant, not a loan - that you can claim for your business. The ERC is available to both small and mid-sized businesses. It is based on qualified wages and healthcare paid to employees.
How do I qualify for the ERC?There are two ways to qualify: FULL OR PARTIAL SUSPENSION OF BUSINESS OPERATIONS A government authority required partial or full shutdown of your business during 2020 or 2021. This includes your operations being limited by commerce, inability to travel, or restrictions of group meetings. GROSS RECEIPTS REDUCTION Gross receipt reduction criteria are different for 2020 and 2021 but are measured against the current quarter as compared to 2019 pre-COVID amounts.
What qualifies as operational changes?Here are some impacts to consider that qualify your business for the Employee Here are some impacts to consider that qualify your business for the Employee Retention Credit: 1. Change in business hours 2. Partial or full suspension of your operations 3. Shutdowns of your supply chain or vendors 4. Reduction in services offered 5. Reduction in workforce or employee workloads 6. A disruption in your business (division or department closures) 7. Inability to visit a client’s job site 8. Suppliers were unable to make deliveries of critical goods or materials 9. Additional spacing requirements for employees and customers due to social distancing 10. Change in job roles/functions 11. Tasks or work that couldn’t be done from home or while transitioning to remote work conditions 12. Lack of Travel 13. Lack of Group Meetings
No revenue decline, do I still qualify?There are two ways to qualify; EITHER a change in your operations OR a revenue decline. You do not need a revenue decline to qualify, in fact many businesses had a revenue increase and still qualified.
Do we still qualify if we already took the PPP?Yes. Under the Consolidated Appropriations Act, businesses can now qualify for the ERC even if they already received a PPP loan. Note, though, that the ERC will only apply to wages not used for the PPP.
Why Are Some Businesses Having Trouble Understanding the Erc?The ERC program was created in early 2020 and subsequently updated, changed, and expanded a few times over the next two years through new acts passed by Congress. As a result, many businesses have disqualified themselves due to misinformation, lack of guidance, or lack of understanding. Others have missed out simply because they did not have the time to figure out how to qualify and file the paperwork. Sending in the wrong paperwork, or filling it in incorrectly, has created lengthy delays in receiving the credit, if at all.
Is the refund considered taxable income?The refund is a deduction in the payroll expense for the period that the credit is for. The interest that the IRS pays on the credit is considered taxable income in the period that the payment is received.
What period does the program cover?An eligible employer claiming a refundable credit for any quarter in 2020 must file its 941x forms by April 15, 2024. An eligible employer claiming a refundable credit for any quarter in 2021 must file its 941x forms by April 15, 2025. We have clients who have received refunds from $100,000 to $6 million.