The Employee Retention Credit
Covid has created many challenges for business owners. However, the good news is the government is rewarding business owners for retaining their employees during these challenging times. As a result, you may now be eligible for Employee Retention Credits (ERC) of up to $26,000 per employee.
The ERC program was created under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) as part of the federal government’s relief program to encourage and reward business owners that retain employees during the COVID-19 pandemic. Recently the policy was amended to enable business owners to qualify for ERC tax credits even if they received PPP loans. The time period the program covers was also extended from March 22, 2020 to September 30, 2021. Details of the program include:
Up to $26,000 PER EMPLOYEE
Available for 2020 and 1st through 3rd quarters of 2021
Qualify with decreased revenue, COVID related shutdown or supply chain disruption
No limit on funding (ERC is NOT a loan)
ERC is a refundable tax credit
QUALIFY IF YOUR BUSINESS EXPERIENCED
Partial or Full Suspension of Operations
While the general qualifications for the ERC program seem simple, the interpretation of each qualification is very complex. Our significant experience allows us to ensure we maximize any qualifications that may be available to your company. Companies must have had only ONE of the following circumstances to qualify for the Employee Retention Credit.
Supply Chain Disruption
Supply Chain Disruption can be anything from delayed supplies, changes in product, change in packaging, etc. For example, many restaurants weren’t able to get certain types of meat, paper towels or carryout containers during the pandemic. Delivery companies couldn’t get truck parts or scanners. Hotels were unable to receive furniture, towels and sheets due to ports being shut down, which delayed renovation plans. These impacts qualify a company regardless of revenue gain or loss.
Gross receipt reduction criteria is different for 2020 and 2021. For 2020 you must have experienced a 50% reduction of gross sales for the 2020 quarter as compared to the same quarter in 2019. When and if the revenue reduction in 2020 gets back to 80% of the 2019 level, the qualification ends. For 2021 you can qualify if you had a 20% reduction of gross sales for the 2021 quarter as compared to the same quarter in 2019.
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. This does not mean that your revenue must have decreased to use this qualification.