Who qualifies and who does not?
There is a big misunderstanding and much confusion surrounding the CARES Act Employee Retention Credit (ERC):Who qualifies and who does not?
Unfortunately, many companies do not realize that per the CARES Act law, almost all businesses qualify for the Employee Retention Credit. This confusion among business leaders is literally costing their companies millions of dollars; money that the Federal Government has specifically allocated to help U.S. businesses continue to survive and prosper during this historic time of pandemic and economic crisis.
The ERC allows businesses and non-government nonprofit organizations impacted by COVID-19 eligible to receive a refundable, above the line Federal payroll tax credit. This credit can be utilized as a cash refund, worth up to $5,000 per employee.
Here are the five most common misconceptions regarding the Employee Retention Credit:
- We are an essential business and therefore we do not qualify.
False. The CARES Act does not make an “essential” versus “non-essential” employer distinction regarding ERC qualification. An essential business can qualify for the ERC either because its operations are fully or partially suspended because of a governmental order, or because gross receipts for the business in any quarter in 2020 are below 50% of gross receipts for the same quarter in 2019.
- We were not shut down and stayed open the whole time and therefore do not qualify.
False. If your business had to change operations in any way due to governmental orders OR if gross receipts for the business in any quarter in 2020 are below 50% gross receipts from the same quarter in 2019, your business qualifies. A change in operations means extra cleaning or sanitizing, installing/utilizing protective equipment, temperature checks, a change in job roles/functions, and more.
- Our company made over 50% sales year-over-year and therefore do not qualify.
False. Your business needs to either experience a 50% decline in gross receipts OR suspension in operations, not both. Almost every business has been impacted in some way by a national, state, or local governmental order, therefore qualifying the business.
- We are profitable this year and therefore do not qualify.
False. We have helped many companies that were profitable this year receive anywhere from thousands to millions of dollars in credits. This includes grocers, manufacturing, logistics companies, and more. If your business has been impacted in some way by the pandemic, you qualify.
- We are a non-profit company, don’t pay taxes, and do not qualify.
False. Unlike past employee retention credits, this credit also applies to tax-exempt organizations if the operation of the organization is fully or partially suspended due to governmental orders related to COVID-19. Many nonprofit schools, day care centers, counseling centers, ministries, churches, and clubs closed their buildings and/or partially suspended services to comply with government orders and guidelines. This cessation of services is a suspension of operations which would qualify that organization for the ERC.
If your company falls into any one of these categories, most likely, your company qualifies! And unlike the PPP loans, there is NO public disclosure with the Employee Retention Credit because it is a Federal tax credit. All information is highly protected for nondisclosure under the Internal Revenue Service Code.
Synergi Partners is the largest private disaster tax credit company in the United States. Our CEO and our partner law firm, DLA Piper, were both instrumental in the drafting of the tax credit legislation along with the CARES Act, participating in many of the committee meetings. At Synergi Partners, we guarantee and defend our work against audits, if necessary. Our work and methods are consistent, proven, and defendable.