When the COVID-19 pandemic started, the federal government stepped up to provide essential support for American businesses. Multiple stimulus packages and tax credits were passed through 2020 and 2021 – including the Employee Retention Credit (ERC).
This incentive through the CARES Act provides funding to encourage businesses to maintain employees, even when the company was closed or had shortened operating hours due to the pandemic.
Business Qualification and Eligibility for ERTC
While many businesses qualify for the Employee Retention Credit, specific criteria must be met.
- Employers carrying on a trade or business whose trade or business’s operation is fully or partially suspended due to orders from a governmental authority limiting commerce, travel, or group meetings due to COVID-19
- Business closures that resulted in a reduction of gross receipts.
- Startup Companies after February 15, 2020 with gross receipts under $1M may also qualify as a “Recovery Startup Business.” Startups are also the only business that is eligible for Q4 2021 ERC’s.
There are restrictions and exceptions to these qualifications. The best solution is to schedule an appointment with us at ReFOCUSed Business Consulting to identify the specific tax credits and relief available during the pandemic and beyond.
Current Guidelines: Employee Retention Credit
Stimulus packages and guidelines have changed multiple times, making it hard for employers to keep up with the current details of ERTC. Here is an overview of the most recent version. Employers can receive a refundable tax credit up $26,000 over 2020 and 2021.
Here are a few other important details to note about the ERC:
- If a business received a PPP loan, they may also be eligible to receive ERC.
- Employees Must be W2 Employees.
- Owners may be eligible.
- Family Members of owners are excluded.
- Companies with up to 500 employees can receive benefits for wages in 2021.
- Businesses with severe financial distress (90% or greater loss on gross receipts) have no employee cap on wages.
Do the math, and you’ll see that these credits can add up quickly. A small mistake could result in a business missing thousands of dollars in federal support. Don’t leave money on the table! Talk to an experienced team, like ReFOCUSed Business Consulting, for help in maximizing your available tax credits.
Avoid These Common ERC Mistakes
It’s easy to see why the changing guidelines make it hard for employers to stay current with the latest tax credits. For example, in the beginning, companies that received PPP loans could not claim ERC. Then, legislation changed this rule, and now employers can receive both PPP and ERC.
Other businesses are missing out because they misunderstand the gross receipts requirements or assume that they don’t qualify because their business wasn’t shut down during the pandemic.
There are many other reasons why business owners mistakenly assume that they don’t qualify for ERC. So instead of missing out on the available support, make sure to talk to an expert consultant right away to maximize your tax credits this year.
How to Begin
Refocused Business Consulting can provide free preliminary consultations to assess your eligibility for Employee Retention tax credits. Included is a free estimation in the amount of credits you will receive through the program. Contact us today to learn more!