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 $19,000 per employee.
We took the PPP and do not qualify.
False. The new stimulus package recently signed into law allows businesses that received Paycheck Protection Program (PPP) loans to also receive the ERC. However, employers may only utilize the ERC towards wages that are not paid for with forgiven PPP proceeds.
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 declined by 20% year-over-year.
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 declined by 20% year-over-year, 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’s year-over-year sales did not decline by 20%, therefore do not qualify.
False. Your business needs to either experience a 20% 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 and therefore do not qualify.
False. We have helped many companies that were profitable in 2020 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.
If you are interested in learning how your business can take advantage of these valuable credits, click the button below.
Avg: ’20 / ’21
Coronavirus Aid, Relief and Economic Security Act
On Sunday, December 27, 2020, the President signed a $900 billion COVID-19 relief package into law that includes additional relief for businesses. Specifically, the new legislation amends, expands, and enhances the CARES Act Employee Retention Credit (ERC).
The ERC was previously unavailable as an option for relief to businesses that received Paycheck Protection Program (PPP) loans through the SBA. However, the new legislation explicitly provides a retroactive amendment to March 27,2020 and clarifies these businesses are eligible to receive the ERC—just not on wages paid with PPP loan funds. Other important changes to the ERC include: (1) a prospective credit increase from 50% of up to $10,000 of qualified wages annually to 70% $10,000 of qualified wages per quarter starting January 1, 2021; and (2) public universities and hospitals are now considered eligible employers.
Does your company qualify for the Employee Retention Credit?
Amount: Claim credits up to $19,000 per employee for all calendar quarters.
When: Reduce your federal employment taxes whenever you process your next payroll.