The Employee Retention Credit Program is a payroll tax refund to incentivize businesses that kept employees on payroll during the pandemic. With the help of the Consolidated Appropriations Act of 2021 (CAA), even more businesses are eligible for Employee Retention Credit (ERC). You could be qualified and not even know it! We’ve heard the confusion regarding eligibility, especially from those who have received the Paycheck Protection Program Loan. Let’s review some common misconceptions and set the record straight:
Misconception: “My business has received a Paycheck Protection Program loan; I cannot claim ERC.”
Truth: Businesses may have both! PPP Loans and forgiven PPP Loans do not disqualify you from ERC.
Misconception: “I cannot claim ERC because my business’s gross receipts did not decrease by 50% or more.”
Truth: Since the CAA, qualifications have now been changed from a 50% decrease in business revenue to 20% during the first three quarters of 2021.
Misconception: “My business only closed for a little while during the pandemic, so I am not qualified.”
Truth: Even a partial business shutdown makes you eligible. Other qualifiers include supply chain interference, vendor and/or operation limitations, shortened business hours, and significant revenue decrease.
Misconception: “Essential business and/or non-profits do not qualify.”
Truth: ANY business that experienced a revenue decrease and/or operational limitations is eligible. All non-profit organizations (including hospitals, churches, and museums) are qualified for ERC.
Misconception: “I cannot apply because my business revenue increased.”
Truth: Follow-up questions: Did you close the business at any point due to government regulations? Were you impacted? Then you may qualify!
Misconception: “We only saw a decrease in revenue in Quarter 4 of 2020 and increased again in Quarter 1 of 2021 which affects the eligibility.”
Truth: You can apply for ERC if a loss in revenue (or hold in operations) occurred in ANY quarter of 2020.
Misconception: “My company of over 500 employees is too big to qualify.”
Truth: The employment qualifier is for full-time personnel, double check the total!
Tax refunds and understanding eligibility can be puzzling at times, which is why we are here for you. At ReFOCUSed Business Consulting, we help business owners optimize profits, manage strategies, and improve overall systems. We encourage you to schedule a consultation and to please contact us for more information.