ERC Tax Credit – FAQ


The ERC Tax Credit was established because usiness operations all over the country were impacted by government regulations imparted during the Coronavirus pandemic of 2020 and 2021. In addition to legislation, the tax code was amended to make payroll tax credits available to businesses in every industry.

erc tax creditThe “Consolidated Appropriations Act, 2021” (“CAA”), which created a path for relief for a variety of businesses, health care service providers, and other entities impacted by the pandemic. One such opportunity afforded to qualified businesses is the Employee Retention Credit (“ERC”).

The original CARES Act was strengthened when Congress wrote the CAA since most employers had sustained income levels and taken PPP loans, which had disqualified so many until October 2021.

We hear many questions concerned the Employee Retention Credit, and want to address these below:

1. Which Employers Qualify for the ERC Tax Credit?

Businesses that operated during the fiscal year of 2020 and 2021:

  • Experienced a full or partial suspension because of government regulation during the pandemic,
  • Supply chain disruptions because suppliers were shut down by government order, or
  • Experienced a significant loss of gross receipts.

2. What Percentage Is Considered a “Significant Decline” in Gross Receipts?

erc tax creditIn 2020, the IRS considered a decline of more than 50 percent to be significant in comparison to 2019.

In 2021, the IRS lowered the percentage to 20 percent in comparison to gross receipts in 2019 for the same quarter.

One exception was made for 2021, if a comparable quarter did not exist in 2019, a previous quarter could be used if the decrease was greater than 20 percent.

3. Will All of My Employees Qualify Under the ERC Tax Credit Program?

Company size is a factor in which employers qualify under the Employee Retention Credit program.

For 2020, the IRS defines a ‘small employer’ has fewer than 100 employees.

For 2021, all employers with fewer than 500 full-time employees still qualify for the ERC.

Employers with more full-time employees can still claim the ERC credit on wages paid to employees for not working.

Family members, or employees who own a portion of the company, are ineligible.

4. Which Fiscal Quarters Can Be Claimed Under the ERC Tax Credit Program?

Businesses can qualify for the 2nd, 3rd, and 4th quarter of 2020 and the 1st, 2nd and 3rd quarters of 2021, which includes the pay periods from 3/13/2020 and 9/30/2021.

erc-tax-credit

For start-up businesses, employers can claim ERC credits for wages paid between July 1, 2021 and December 31, 2021.

The best way to find out is to walk through the simple qualification process using your profit & loss reports for 2019, 2020 and 2021. Contact me today.

5. If I Accepted a PPP Loan, Is My Business Eligible to Claim the ERC Tax Credit?

Once the CAA Act was passed in October 2021, businesses that had accepted PPP loans were made eligible to claim the ERC Tax Credits.

The final calculations are different, but you will receive the Tax Credits you qualify for under the Employment Tax Credit program.

If you have been told that you do not qualify because you accepted a PPP loan, please – contact me today to complete the qualification questionnaire for the real answer.

6. How Much Money Will Be Returned to My Business Under the Employee Retention Credit?

Under the ERC Program, gross wages are used in the calculations.

For fiscal year 2020, the maximum amount of $10,000 can be claimed for the year.
Qualified wages of up to 50 percent of $10,000, which is a maximum of $5,000.

For fiscal year 2021, the maximum amount of $10,000 can be claimed for each quarter. Qualified wages of up to 70% of the qualified wages per quarter for the first three quarters, which can add up to $21,000 per employee.

A maximum of $26,000 per employee is available under the ERC Tax Credit Program.

Companies of all sizes are qualifying for the ERC Tax Credit.

 

7. How Does A Business Owner Make An ERC Claim?

Your first step is to contact me, so that I can lead you through the steps without any frustration.

Once you provide the requested information, the payroll experts will take over and maximize the number of credits in your ERTC claim to the IRS.

The ERC Credit amount is calculated using your employee wage reports, profit and loss reports and payroll tax returns.

This process is easier than you might imagine, and it would be wise to get started today.

8. What Is the Deadline to Submit My ERC Claim?

erc-tax-creditAmended Payroll Tax Returns can be filed within three years of filing the original Form 941.

For 2020 Quarter 1, the deadline is Quarter 1 of 2023, and for Q1, 2021, you have until Q1 of 2024 and so on.

In other words, the longer you wait, the more money you will lose in your ERC Tax Credit claim.

9. Will My Business Have to Claim the ERC Tax Credit Money as Income?

The funds returned to you under the ERTC Tax Credit is not considered ‘taxable income’ under the IRS tax code. However, the amount returned for each quarter will
adjust your payroll tax return, which is Form 941.

After you have received your refund, you will be responsible for informing your CPA of the final ERC amount, so your tax professional can report the changes on your business tax returns.

10. What Are the Steps I Should Take Right Now to Claim the Employee Tax Credit (ERC)?

Your part of this process doesn’t have to be difficult. If you will set aside 30 minutes today to gather your Profit and Loss Reports, we can get started.

Contact me today. I will guide you through starting the process and have you fill out the qualification survey analysis.

Once we have walked through the qualification survey, you will have a better understanding of the amount your business could receive.

Please, take action today. Once you get started, you will find that the process has been streamlined and the experts do the difficult part.

Contact me today for specific help with your Employee Retention Credit claim!

 

“When it comes to procrastination and overthinking,
we have to overcome our self-doubt.”  ~ 
Jay Shetty