The Ultimate ERC Tax Credit Guide
ERC Program Explained
Who Qualifies for the tax credit?
How was your business impacted?
How to claim your tax credit
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Everything You Need to Know About The ERC Tax Credit
On March 27, 2020, the CARES Act was signed into law by former President Donald Trump, which includes the employee retention credit (ERC).
The ERC is a type of economic aid intended to support businesses during the pandemic, providing a refundable tax credit against specific employment taxes to retain employees on their payroll.
The purpose of the ERC is to offer eligible employers access to the credit by reducing their usual employment tax deposits. The credit amount can reach up to 50% of qualified wages paid between March 12, 2020, and January 1, 2021.
Under the Consolidated Appropriations Act (CAA), President Biden extended the ERC into 2021. The extension covers the first two quarters of the year, from January 1, 2021, to June 30, 2021. Employers can now claim a credit of up to 70% of qualified wages paid, and the $10,000 credit per employee has been adjusted from a calendar year basis to a per-quarter basis.
Furthermore, the CAA provides an opportunity for businesses that received a Paycheck Protection Program (PPP) loan between March 13, 2020, and December 31, 2020, to potentially qualify for the ERC. If a business did not use their PPP loan to pay wages, they may apply for the ERC.
If no other wages were paid to an employee, group healthcare expenses are deemed as qualified wages under the law.
The American Rescue Plan Act of 2021 extended the ERC until January 1, 2022, but the Infrastructure Investment and Jobs Act eliminated the credit for the fourth quarter of 2021. As a result, the ERC was retroactively terminated on September 30, 2021.
Consequently, employers can claim up to $7,000 per employee for the first three quarters of 2021, resulting in a total credit of $21,000.
A credit of up to 70% of qualified wages paid can be claimed by employers.
The $10,000 credit per employee has been updated to a per-quarter basis instead of being based on the calendar year.
Moreover, the CAA permits businesses that received a Paycheck Protection Program (PPP) loan between March 13, 2020, and December 31, 2020, to potentially qualify for the ERC. If businesses did not use their PPP loan to pay wages, they can still apply for the ERC.
Under the law, group healthcare expenses are considered qualified wages if no other wages were paid to the employee.
The American Rescue Plan Act of 2021 extended the ERC until January 1, 2022. However, the Infrastructure Investment and Jobs Act repealed the credit for the fourth quarter of 2021, retroactively ending ERC on September 30, 2021.
As a result, employers can claim up to $7,000 per employee for the first three quarters of 2021, leading to a total credit of $21,000.
Additionally, under the ERC is the Recovery Startup Businesses program. This program covers businesses started after February 15, 2020. These businesses can still receive tax credits through the end of 2021.
https://www.irs.gov/coronavirus/employee-retention-credit
We built a qualification survey to stress the need to be qualified to receive the ERC credits. We are helping businesses claim the credits that they can legally apply for, see article below from the IRS. Please follow our instructions and recommendations.
Find Out if Your Business Qualifies For The ERC Tax Credit
To Receive Up To $26,000 Per Qualified Employee
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Who Qualifies For The ERC Tax Credit?
With the passing of the American Rescue Plan Act, most employers are eligible for the Employee Retention tax credit. Additionally, as previously mentioned, the CAA has expanded the qualifications to include businesses that received a PPP loan.
There are two primary requirements for employers who wish to claim the ERC Tax Credit.
Firstly, for the calendar quarter in which they are applying, the credit only applies to businesses that were fully or partially closed due to orders.
Secondly, businesses that had a decrease of more than 50% in gross receipts for the same quarter in 2019 (for 2020) and below 80% (for 2021) are also eligible.
Under the Recovery Startup Business program, startup businesses must have had an average annual gross receipt of less than $1 million.
Eligibility Based on Business Impact
Even if your business did not have a reduction in revenue or wasn't deemed "essential", your business could still be eligible.
There are some of the commmon COVID-19 impact scenarios that still qualify a business to receive the ERC Tax credit:
Change in business hours
Partial or full suspension of your operations
Shutdowns of your supply chains or vendors
Reduction in services offered
Reduction in workforce or employee workloads
Suppliers were unable to make deliveries
Spacing requirements for social distancing
Change in job roles and/or functions
Lack of travel and/or group meetings
Inability to visit a client's job site
The ERC Tax Credit is still available for many business owners who have experienced various challenges due to COVID-19. These are just some of the common situations we have observed that still make businesses eligible for the credit.
It is crucial to consult an ERC Specialist to assess your eligibility and assist with the necessary paperwork to obtain your tax credit. Even if you assume your business is not eligible, it may still qualify.
So click the button below to complete our short ERC Qualification Questionnaire
Find Out if Your Business Qualifies For The ERC Tax Credit
To Receive Up To $26,000 Per Qualified Employee
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How To Claim Your Tax Credit Once Qualified
Employers do not need to submit a separate application for the employee retention credit. Instead, they can claim the credit directly on their federal employment tax returns by completing Form 941, which is the Employer's Quarterly Federal Tax Return.
If employers later discover that they are eligible for the tax credit, they can amend their Form 941 accordingly. This is great news for businesses seeking to claim the credit.
