Coronavirus (COVID-19) Tax Credits, Incentives | ERC Eligibility, Claim Assistance

Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) Act on March 27, 2020, just two weeks after COVID-19 was declared a pandemic. The intent of the legislation is to aid businesses that experienced certain financial declines or business operations limitations as a result of the pandemic yet continued to retain employees. If you still supported your employees through financial or operational challenges during the COVID-19 pandemic, you may be eligible for the CARES Act ERC.

Get Started

CARES ACT Employee Retention Tax Credit

The CARES Act was signed into law on March 27, 2020, to address the negative economic impact of the COVID-19 pandemic. Within the CARES Act, Congress created the Employee Retention Credit (“CARES ERC”), a fully refundable payroll tax credit, to provide aid to employers impacted by the COVID-19 pandemic.

ERC Overview

Eligibility for the ERC is evaluated on a quarterly basis and is based on each employer’s specific facts and circumstances. An employer is eligible for the ERC if it experienced either:

1. a full or partial suspension of business operations due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
2. a significant decline in gross receipts (50% decline in gross receipts in 2020 compared to the same quarter in 2019; 20% decline in gross receipts in 2021 compared to the same quarter in 2019).

Subject to certain limitations, PPP recipients and certain instrumentalities of the government are generally permitted to claim the ERC if they meet one of the above eligibility tests.
Employers who are eligible for the ERC in a given quarter may qualify for 50% of up to $10,000 in qualified wages in 2020 per employee for the year, and 70% of up to $10,000 in qualified wages per employee, per quarter in 2021.
The wages that may qualify for the ERC (the “Qualified Wages”) vary depending on an employer’s average full-time headcount in 2019. A “small” employer’s Qualified Wages during an eligible quarter may include all wages paid and employer paid qualified health plan costs. Qualified Wages for a “large” employer during an eligible quarter are wages paid not in exchange for a service and an allocable portion of employer paid qualified health plan costs.
A “small” employer is defined in 2020 as an average of 100 or less full-time employees in 2019, and an average of 500 or less full-time employees in 2019 for the 2021 credit. A “large” employer is defined in 2020 as an employer with an average of more than 100 full-time employees during 2019, and an average of more than 500 full-time employees in 2019 for the 2021 credit.

Small Employers
2020	<100
2021	<500

Large Employers
2020	100+
2021	500+

The ERC can be monetized by completing an IRS Form 941-X and requesting a refund from the IRS.

Misconceptions About the CARES Act Employee Retention Credit (ERC)

We took the PPP, so we are not eligible.

False. The Consolidated Appropriations Act amended the original CARES Act ERC to permit businesses that received Paycheck Protection Program (PPP) loans to be eligible for the ERC if they experienced:

a full or partial suspension of business operations due to government orders enacted in response to the COVID-19 pandemic (the “Government Orders Test”), OR
a significant decline in gross receipts (the “Gross Receipts Test”).

However, PPP recipients who are eligible for the ERC cannot include wages that were paid with forgiven PPP loan proceeds in the ERC calculation.

We are an essential business, so we are not eligible.

False. The ERC does not make a distinction between an “essential” or “non-essential” employer. A business, whether classified in state or local orders as essential or not, may be eligible for the ERC so long as it satisfies the Government Orders Test or Gross Receipts Test. For example, a business that was classified as “essential” by a government order and was able to continue to operate may nonetheless have experienced a partial suspension or a significant decline in gross receipts and be eligible for the ERC.

We did not shut down our offices, so we are not eligible.

False. An employer is eligible for the ERC if it can meet the Government Orders Test or the Gross Receipts Test. The Government Orders Test provides a business must have experienced a full or partial suspension of business operations due to government orders enacted in response to the COVID-19 pandemic. A “partial suspension” of operations does not mean a complete cessation of operations or closure of locations. Thus, a business can demonstrate a partial suspension of operations through other impacts to operations, such as the inability to perform certain services. Whether a business experienced a full or partial suspension is a facts and circumstances analysis.

Our operations were suspended, but we were profitable, so we are not eligible.

False. The ERC does not require a business to experience a decline in revenue to be eligible for the ERC. The intent of Congress is clear in the plain language of the legislation, which provides that an employer must satisfy the Gross Receipts Test or the Government Orders Test, not both. Thus, a company does not have to experience a decline in revenue to be eligible for the ERC.

We are a non-profit, so we are not eligible.

False. The ERC has always been available to non-profits who satisfy either the Government Orders Test or Gross Receipts Test. The ERC has benefited many non-profit organizations such as non-profit schools, hospitals, churches, and day-care centers.

Let’s connect

Contact Synergi to discuss the services we provide. Please fill out the form below.

Information entered can be estimated.

Coronavirus (COVID-19) Economic Relief Legislation