Employee Retention Tax Credit Qualifications for ERC Refunds

DALLAS, TX / ACCESSWIRE / July 13, 2023 / Understanding qualifications for the Employee Retention Tax Credit (ERTC)has become more important than ever. The IRS rules for getting tapping into this potentially lucrative tax credit have changed over the years. Receiving an ERC refund is not automatic. To be eligible for the tax credit, businesses must meet certain IRS requirements. Recent updates have expanded the eligibility criteria, and there is still time to retroactively file for the ERC credit and amend past 2020 and 2021 tax years.

“The path to claiming the ERC tax credit is not automatic. It is contingent upon a business’s ability to meet certain specific qualifications. Grasping the nuances of these IRS ERC Credit requirements is a critical step in the ERTC process. Only by meeting the qualifying prerequisites can businesses unlock the substantial benefits offered by the Employee Retention Credit,” said Marty Stewart, Chief Strategy Officer (CSO) with Disaster Loan Advisors (DLA). DLA has assisted over 700+ companies with their ERC / ERTC Tax Credit claims, by-the-book per current IRS ERTC credit rules and guidelines.

Employee Retention Tax Credit Key Takeaways to Claim a ERC Refund:

• The ERC (Employee Retention Credit) was established to provide relief to eligible businesses during the COVID-19 pandemic and offered significant cash relief as part of the CARES Act.
• To qualify for the ERC, businesses must have experienced a full or partial suspension of operations due to governmental orders or a significant decline in gross receipts.
• Businesses may retroactively claim the tax credit for the 2020 and 2021 tax years, as long as they qualify.
• Business owners can also claim the ERC tax credit even if they did not fully shut down during the pandemic or thrived. They may still qualify based on significant declines in gross receipts.

Employee Retention Credit Basics

Launched as an integral part of the Coronavirus Aid, Relief, and Economic Security Act (CARES), the Employee Retention Credit (ERC) swiftly became a vital lifeline for businesses navigating through the tumultuous economic waters of 2020 and 2021.

The ERC is a temporary payroll tax credit designed to reward business owners who continued to pay employees despite experiencing financial turbulence during the pandemic. It offers significant cash relief by providing maximum recoupment of up to $5,000 per employee for 2020, and up to $28,000 per employee in 2021.

The ERTC Tax Credit targets US-based businesses, including small companies, startups, nonprofits, corporations, LLCs, and those with less than 100 employees in 2020 and less than 500 employees in 2021. These enterprises span nearly all industries – from semiconductors and microchips manufacturers dealing with supply chain disruptions to restaurants grappling with indoor dining bans and capacity restrictions. Even sectors such as construction companies juggling staggered work crews due to social distancing orders were included.

Several qualifications must be met to take advantage of this generous payroll tax credit offer. Suspending operations partially or fully under specific governmental orders or evidencing a decline in gross receipts in certain calendar years are essential qualifiers.

Also critical is ensuring compliance requirements like accurate tracking of eligible wages and filling out Form 941-X correctly for the adjusted Employer’s Quarterly Federal Tax Return filing process.

Who Qualifies for the ERC Credit?

To qualify for the ERC Credit, businesses must have experienced a full or partial suspension of operations due to governmental orders or a significant decline in gross receipts. Find out if your business is eligible and how to claim this valuable tax credit.

Navigating the basic qualifications for the Employee Retention Credit (ERC) is imperative for businesses seeking financial relief amid economic hardships brought on by the pandemic. A foremost criterion to qualify includes experiencing a full or partial suspension of operations as mandated by government orders linked to COVID-19, affecting your ability to carry on regular business activities.

Additionally, all types of employers, from corporations and small businesses to nonprofits, are eligible for ERTC credit provided they have employees. Excluded are self-employed individuals who don’t have other employees.

Special Considerations

Special considerations around the Employee Retention Tax Credit (ERTC) focus on a company’s specific circumstances and how those can affect its eligibility. If your business experienced disruption due to pandemic-related government orders, such as full or partial shutdown mandates, customer capacity limits, social distancing requirements, or work-from-home orders which led to a loss of income, you would likely meet the criteria for ERC qualification.

Furthermore, special provisions apply to different types of businesses. For instance, startups operating after February 15th, 2020, could qualify under Recovery Startup Credit rules. Self-employed individuals may also be eligible based on their annualized revenue and payroll taxes.

Business Owners’ Guide to ERC Qualifications

To ensure that you’re eligible for the Employee Retention Credit (ERC), there are a few qualifications that business owners need to be aware of. Firstly, your business must have experienced a full or partial suspension of operations due to governmental orders during the pandemic.

This could include mandates such as indoor dining bans or capacity restrictions. Alternatively, if your business has faced a significant decline in gross receipts compared to previous years, you may qualify for the ERC.

Next, it’s important to understand who qualifies as an employee to calculate qualified wages. Generally, employees who received wages during suspension or decline in gross receipts are eligible.

For businesses with over 100 full-time employees in 2019, qualified wages are typically those paid to employees not providing services due to the suspension or decline. On the other hand, if your business had 100 or fewer full-time employees in 2019, qualified wages usually encompass all wages paid during this time.

Remember that “wages” includes taxable wages and certain contributions made towards health benefit plans for your employees. Consider these points when determining whether your business meets the qualification requirements set out by the IRS.

By understanding these criteria and working within them, you can maximize your chances of claiming this valuable tax credit and obtaining financial relief during these challenging times.

How to Determine Your ERC Eligibility

Determining your Employee Retention Tax Credit (ERTC) eligibility is crucial in maximizing your potential tax benefits. To do so, you need to consider two key factors: the suspension of operations and the decline in gross receipts.

The ERC can be claimed if your business experienced a full or partial shutdown due to governmental orders or saw a significant drop in revenue.

To determine if you meet the suspension of operations requirement, assess whether your business faced mandates such as capacity limits, social distancing orders, work-from-home directives, or reduced operating hours.

These measures could qualify as a suspension under the ERC guidelines.

Additionally, analyzing your gross receipts is essential. Compare your revenue during specific quarters of 2020 or 2021 with those in 2019. You may qualify for the credit if there was a substantial decline in gross receipts during any eligible quarter.

Considering both aspects will help you ascertain whether you meet the eligibility criteria for claiming the ERC. By carefully evaluating these factors and understanding how they apply to your unique circumstances, you’ll be well-equipped to take advantage of this valuable tax credit opportunity.

Claiming ERC for Businesses That Did Not Fully Shut Down

Businesses that did not fully shut down during the COVID-19 pandemic may still be eligible for the Employee Retention Credit (ERC). Even if your business remained operational, you could qualify for the ERC if you experienced a significant decline in gross receipts.

The IRS defines a significant decline as a 50% or more reduction in gross receipts compared to the same quarter in 2019. So, even if your business didn’t completely close its doors, you could benefit from this valuable tax credit.

By claiming the ERC, you can recover some of your employee wage expenses and receive much-needed financial relief during these challenging times.

Claiming ERC for Businesses That Thrived During the Pandemic

Businesses that survived and thrived during the pandemic may also be eligible to claim the Employee Retention Credit (ERC). While the ERC was initially designed to provide relief to struggling businesses, it’s worth noting that thriving businesses can still take advantage of this tax credit.

If your business experienced a full or partial suspension of operations due to government orders or a significant decline in gross receipts, you may qualify for the ERC. Additionally, if you had more than 100 full-time employees in 2019 and paid wages to employees not providing services due to suspension or decline in gross receipts, those wages could be considered qualified wages to claim the ERC.

ERC and PPP: Can You Get Both?

Businesses have been challenged to navigate the intricate web of COVID-19 relief programs, including the Employee Retention Credit (ERC) and the Paycheck Protection Program (PPP).

Initially, businesses were not allowed to receive a PPP loan and ERC. However, things have changed. The Consolidated Appropriations Act lifted this restriction retroactively for 2020 expenses and made it optional for 2021.

This means that eligible businesses can now potentially qualify for ERC and PPP funds, providing additional financial support during these challenging times. It’s important to consult with a tax credit specialist or your ERC provider to understand how maximizing benefits from both programs can benefit your business’s circumstances.

Choosing the Right ERC Provider

When choosing the right ERC provider, finding a reputable tax credit specialist who can navigate the complexities of ERC eligibility and maximize your potential refund is crucial.

With many different factors and qualifications, having an experienced professional can make all the difference. Look for a provider with extensive knowledge of the Employee Retention Credit and a track record of helping businesses successfully claim their credits.

They should have expertise in payroll tracking, compliance requirements, and filing amended employment tax returns if necessary. By partnering with the right ERC provider, you can ensure that you are taking full advantage of this valuable opportunity to boost your business’s financial recovery without any unnecessary hassle or confusion.

Employee Retention Tax Credit Guidance from the IRS

The Internal Revenue Service (IRS) wants business owners to stay protected. They have issued warnings about ERC credit frauds and scams so businesses stay aware. Furthermore, the IRS warns you never pay an ERC contingency fee or percentage based on your employee retention credit tax refund amount.

For ERTC 2023 updates and beyond, eligible employers and businesses have an ERTC deadline of April 15th, 2024, for retroactively filing ERC credit claims for eligible quarters from the 2020 tax year. April 15th, 2025, is the deadline to claim the tax credit for eligible quarters from the 2021 tax year.

About Disaster Loan Advisors™ Employee Retention Credit (ERC) Services

Disaster Loan Advisors™ (DLA) is a trusted team of financial tax professionals and Employee Retention Credit (ERC) consulting specialists dedicated to saving businesses from lost sales, lost customers and clients, lost revenue due to financial and economic harm caused by the COVID-19 / Coronavirus disaster, Delta and Omicron variants, and other recession and inflation downturns in the economy.

Having worked with over 1500+ business clients navigate the SBA Economic Injury Disaster Loan (EIDL), Paycheck Protection Program (PPP), and Restaurant Revitalization Fund (RRF) programs, DLA further refined its expertise in the ERC Tax Credit IRS program having assisted more than 700+ companies with their ERC Claims. Assisting ownership groups with multiple business entities, multiple location business owners, and other complex situations that require an expert tax and accounting strategist to be brought in to assess the situation and create the most strategic path forward.

DLA further specializes in another key pandemic-era SBA / IRS program where business owners are leaving a lot of relief fund money on the table. It is the often misunderstood and confusing Employee Retention Tax Credit (ERC) / Employee Retention Tax Credit (ERTC) program whereby company owners and partners can retroactively receive up to $26,000 to $33,000 back for each W-2 employee they had on payroll for the 2020 and 2021 tax filing years. Done correctly, these tax credits or cash refunds can be claimed retroactively for up to 3 years.

It’s encouraged that business owners obtain professional assistance in going through the complex 941-X amended filing process to help your company maximize the full value of the ERC Credit Program, while staying safe and compliant within the complex IRS rules and regulations for claiming the ERC Credits.

DLA doesn’t charge a percentage (%) of your ERC refund like many companies are charging. Instead, DLA works on a reasonable professional flat-fee basis. If you are looking for an ERC company that believes in providing professional ERC services and value for small business owners, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors is a good fit for you.

Need Strategic Employee Retention Tax Credit Guidance?

CONTACT:
Disaster Loan Advisors
Elena Goldstein
Director of Media Relations
877-463-9777 ext. 3
[email protected]

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SOURCE: Disaster Loan Advisors™ (DLA)