Own a business open in 2020 or 2021 with 5+ Employees? You are eligible!
The Employee Retention Credit (ERC) is a payroll tax refund from the United States Treasury Department that became available on April 1, 2020. The credit is applicable to businesses who kept employees on payroll during the pandemic. In this blog post, we will discuss what the ERC is and how you can claim it!
The Employee Retention Credit is a refundable tax credit of up to 50% of employee wages, up to a maximum of $5,000 per employee. The credit is available for employee wages paid between March 12, 2020 and December 31, 2020. However, employers with more than 100 full-time employees must exclude employee wages paid after December 31, 2020 in order to be eligible for the credit.
In order to be eligible for the ERC, an employer must meet either of two criteria:
1) Experiencing significant decline in gross receipts of at least 20 percent compared to the same quarter in 2019; or
2) Fully or partially suspending operations due to orders from an appropriate governmental authority due to COVID-19.
To claim the credit, employers must file Form 941 for each quarter. Employers can also request an advance payment of the employee retention credit from their payroll processor or by filing Form 7200 with the Internal Revenue Service (IRS).
The Employee Retention Credit is a valuable tool for businesses to reduce employee costs and keep employees on payroll during this difficult time. Businesses should consult with their financial advisors or tax preparers to determine if they are eligible for the ERC and how best to take advantage of it. The IRS website is also a great resource for more information about the ERC. With careful planning, businesses can maximize their employee retention credits and ensure that their employee wages remain steady during the current crisis.
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.
Up to $26,000 per employee
Available for 2020 and the first 3 quarters of 2021
Qualify with decreased revenue or COVID event
No limit on funding
ERC is a refundable tax credit
How much money can you get back?
You can claim up to $5,000 per employee for 2020. For 2021, the credit can be up to $7,000 per employee per quarter.
How do you know if your business is eligible?
To qualify, your business must have been negatively impacted in either of the following ways:
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 receipt reduction criteria is different for 2020 and 2021, but is measured against the current quarter as compared to 2019 pre-COVID amounts.
A business can be eligible for one quarter and not another.
Initially, under the CARES Act of 2020, businesses were not able to qualify for the ERC if they had already received a Paycheck Protection Program (PPP) loan. With new legislation in 2021, employers are now eligible for both programs. The ERC, though, cannot apply to the same wages as the ones for PPP.
Why Us?
The ERC underwent several changes and has many technical details, including how to determine qualified wages, which employees are eligible, and more. Your business’ specific case might require more intensive review and analysis. The program is complex and might leave you with many unanswered questions.
We can help make sense of it all. Our dedicated experts will guide you and outline the steps you need to take so you can maximize the claim for your business.
Our services include:
Thorough evaluation regarding your eligibility
Comprehensive analysis of your claim
Guidance on the claiming process and documentation
Specific program expertise that a regular CPA or payroll processor might not be well-versed in
Fast and smooth end-to-end process, from eligibility to claiming and receiving refunds
Dedicated specialists that will interpret highly complex program rules and will be available to answer your questions, including:
How does the PPP loan factor into the ERC?
What are the differences between the 2020 and 2021 programs and how does it apply to your business?
What are aggregation rules for larger, multi-state employers, and how do I interpret multiple states’ executive orders?
How do part-time, Union, and tipped employees affect the amount of my refunds?
Ready To Get Started? It’s Simple.
1. We determine whether your business qualifies for the ERC.
2. We analyze your claim and compute the maximum amount you can receive.
3. Our team guides you through the claiming process, from beginning to end, including proper documentation.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and ends on September 30, 2021, for eligible employers.
You can apply for refunds for 2020 and 2021 after December 31st of this year, into 2022 and 2023. And potentially beyond then too.
We have clients who received refunds only, and others that, in addition to refunds, also qualified to continue receiving ERC in every payroll they process through December 31, 2021, at about 30% of their payroll cost.
We have clients who have received refunds from $100,000 to $6 million.
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.
Do we still qualify if we did not incur a 20% decline in gross receipts?
Your business qualifies for the ERC, if it falls under one of the following: 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 receipt reduction criteria is different for 2020 and 2021, but is measured against the current quarter as compared to 2019 pre-COVID amounts.
Do we still qualify if we remained open during the pandemic?
Yes. To qualify, your business must meet either one of the following criteria:
Experienced a decline in gross receipts by 20%, or
Had to change business operations due to government orders
Many items are considered as changes in business operations, including shifts in job roles and the purchase of extra protective equipment. The ERC, in this case, also applies only for Q3 and Q4 of 2021. Businesses can qualify, regardless of the number of full-time employees.
About Bottom Line Concepts
We are a no-risk, contingency-based cost savings company. We negotiate on behalf of our clients to get the best prices possible from their existing vendors. We audit old invoices for errors getting our clients refunds and credits. We increase the profitability and overall valuation of our client’s organizations. We believe strongly in all species being created equal. Therefore, animal rights, sustainability, and protecting the environment for future generations are paramount to us. Through our “Line Up For Charity” program we give our clients the opportunity to donate part of the cost savings we achieve to causes our clients are passionate about. We provide a work environment where you can make difference.
Interested in finding out more, or have any questions for us?
