During the first few months of COVID-19, countless businesses were ordered to suspend operations partially or fully in order to comply with emerging health guidelines. The way companies coped with the circumstances greatly varied. Its’ amazing to see how the different companies adapted and continued to operate and retained their employees. Many had no option but to immediately cut costs by reducing their staff and/or office space. Others were able to completely alter their operations to meet the new guidelines and cater to consumers. Ghost kitchens and digital-only models are great examples of how some were able to keep their “doors” open. Regardless of the road they took, these unforeseen circumstances inevitably impacted their organization.
In fact, according to the Bureau of Labor Statistics (BLS), during the pandemic, 56% of establishments (4.7 million) experienced a decrease in demand for their products or services. This sharp decline in business undeniably disrupted the economy, creating unprecedented challenges for business owners and their workforce.
Enter The Employee Retention Credit (ERC), an opportunity that many businesses don’t realize is available.
The ERC was designed to reward employers for retaining their employees and keeping them off of government programs. The Employee Retention Credit (ERC) is a refundable payroll tax credit that was passed in March 2020 as a provision of The Coronavirus Aid, Relief and Economic Security (CARES) Act and was originally intended as an incentive for companies to keep their employees on payroll.
While qualifying businesses have up to three years to claim the credit, the eligibility period ends December 31, 2021. According to a recent statement from The White House, 30,000+ small businesses have claimed more than $1 billion in ERCs this year. In March 2021, President Biden purposefully expanded the ERC in The American Rescue Plan to help heavily impacted businesses regain their footing. And while this program undoubtedly offers participating companies a multitude of benefits, it’s nuanced and there’s a lot to keep in mind when gearing up to claim the credit.
Synergi assists employers with making a determination as to whether they are eligible for the ERC while also ensuring employers are capturing the maximum amount of ERC available under the legislation.
Who’s eligible? (Remember – meeting only one of these criteria makes your business eligible.)
- Businesses of all sizes and tax-exempt organizations that were subject to a full or partial government-ordered suspension in operations due to COVID-19 in 2020 or 2021 (this is inclusive of having limited access to space, equipment or goods, being forced to conduct business during shorter windows of time or being subject to temporary suspension of operations) OR
- Companies that experienced a gross receipts decline of more than 50% during their 2020 calendar year as compared to the same quarter in the previous year OR more than 20% decline of their gross receipts in their 2021 calendar year as compared to the same quarter in 2019 OR
- Businesses that launched after February 15th, 2020, and did not exceed $1 million of average annual gross receipts may qualify for a quarterly ERC cap of $50,000
Another big takeaway here is that thanks to The Consolidated Appropriations Act, employers who received a Paycheck Protection Program (PPP) loan can now retroactively claim the ERC. Businesses cannot use the same wages for both programs. However, if they have sufficient payroll, they can claim the credit by documenting different wages for each use case.
The Employee Retention Credit was created to help businesses stay profitable and continue to invest in their employees — but it’s undoubtedly complicated. The rules have evolved and to fully benefit from the program, you’ll need to closely track and manage documentation that proves your eligibility, which can be challenging for a few reasons:
- Limited knowledge — truly understanding the full legislation. There is so much more than just the IRS FAQs.
- Eligibility and Documentation – how did government orders and COVID impact your business.
- Restricted capabilities — in that same vein, if your team lacks the knowledge, or is focused elsewhere, you won’t have the right level of attention applied to this effort.
- Poor data management — which wages are eligible, and which are not?
- Payroll details — ability to uncover eligible wages that may not be documented in payroll.
Thankfully, here at Synergi Partners, we specialize identifying, calculating, and maximizing tax credits and incentives for businesses. We have a team of tax credit industry veterans with more than four decades of experience—and we’re here to help. We take on all the heavy lifting, meticulously review all relevant data and documentation, assist with eligibility determinations, complete credit calculations, and deliver reports necessary to document and claim the employee retention tax credits.
Let’s get started! Connect with us today to let us determine if you’re eligible for the Employee Retention Credit.