Is your business missing out by not taking advantage of Employee Retention Tax Credits? It’s not too late to claim your Employee Retention Credit (ERC).
Understanding the Employee Retention Credit
The Employee Retention Credit (ERC) originated in the CARES Act of March 25, 2020, the Consolidated Appropriations Act of December 27, and the American Rescue Plan Act of 2021 of March 11, 2021. Along with the Paycheck Protection Program (PPP), the ERC exists to help businesses recover the costs of retaining and paying employees during the economic hardships resulting from the COVID-19 pandemic.
Although the ERC is lesser known than the Paycheck Protection Program, businesses that received PPP can also claim the ERC for qualifying 2020 and 2021 quarters. So what’s the difference between the two? The PPP was a loan program to pay employees, while the ERC is a tax credit qualifying businesses can claim for wages and health plan expenses paid during the COVID-19 pandemic.
Qualified employers can claim up to the following amounts per employee:
- 2020: Recover 50% of qualified costs—as much as $5,000 per employee
- 2021: Recover 70% of qualified costs—as much as $7,000 per employee each quarter
- Qualified employers can claim up to $26,000 per employee for 2020-2021.
3 Ways Your Business Qualifies for the ERC
There are three ways your business can qualify to receive the ERC:
Qualifier #1: Your Business Experienced a Significant Decline in Gross Receipts
2020: If gross receipts for a 2020 calendar quarter were less than 50% of the same 2019 quarter, you qualify for the ERC and continue to be eligible until the quarter after gross receipts rose above 80% of the comparable 2019 quarter.
2021: If gross receipts for a 2021 calendar quarter were less than 80% of the same 2019 quarter, you qualify for the ERC and continue to be eligible until gross receipts rise above 80% of the comparable 2019 quarter.
Qualifier #2: Your Business Experienced a Full or Partial Suspension of Operations due to Government Orders
You may qualify for the ERC if a government order fully or partially shut down your business due to the COVID-19 pandemic. Did government orders negatively impact your normal business operations in 2020 or 2021? Did social distancing requirements, operational mandates, capacity limits, or travel restrictions limit prohibit you from conducting your business operations? If so, your organization may have suffered a more than nominal impact due to government orders and may be eligible to claim the ERC.
Qualifier #3: Recovery Startup Business Program
The Recovery Startup Business program was authorized by the American Rescue Plan Act of 2021 (ARPA), Sec. 9651. The Recovery Startup Business program allows new businesses to recover up to $50,000 per quarter in wages or health plan expenses. The program is an extension and modification of the Employee Retention Credit (ERC), a key tax provision in the 2020 CARES Act, and was specifically designed to incentivize new business creation.
Businesses qualifying under the Recovery Startup Business rules must have begun operations after February 15, 2020, and have had less than $1,000,000 in annual gross receipts for the three tax years preceding the quarter in which the business claims the credit. Additionally, an organization cannot have otherwise qualified under the standard ERC rules.
Let Verity Tax Credits Help You Claim Your ERC
At Verity Tax Credits, LLC, our experienced team can help you to navigate the complex process of claiming the Employee Retention Credits your business deserves. Don’t leave money on the table—Verity Tax Credits can help you maximize savings for your business. Schedule a 20-minute call to discuss whether you qualify.
