Employee Retention Credits
About The ERC Program
What is the Employee Retention Credit (ERC)?
ERC is a stimulus program designed to help those businesses that were able to retain their employees during the Covid-19 pandemic.
Established by the CARES Act, it is a refundable tax credit – that you can claim for your business. The ERC is available to both small and mid-sized businesses. It is based on qualified wages and healthcare paid to employees.
- NUp to $26,000 per employee
- NAvailable for 2020 and the first 3 quarters of 2021
- NQualify with decreased revenue or COVID event
- NNo limit on funding
- NERC is a refundable tax credit
How Much Money Can You Get Back?
You can claim up to $5,000 per employee for 2020. For 2021, the credit can be up to $7,000 per employee per quarter.
How do you know if your business is eligible?
To qualify, your business must have been negatively impacted in either of the following ways:
- NA government authority required partial or full shutdown of your business during 2020 or 2021. This includes your operations being limited by commerce, inability to travel or restrictions of group meetings.
- NGross receipt reduction criteria is different for 2020 and 2021, but is measured against the current quarter as compared to 2019 pre-COVID amounts.
- NA business can be eligible for one quarter and not another.
- NInitially, under the CARES Act of 2020, businesses were not able to qualify for the ERC if they had already received a Paycheck Protection Program (PPP) loan. With new legislation in 2021, employers are now eligible for both programs. The ERC, though, cannot apply to the same wages as the ones for PPP.
How Much Money Can You Get Back?
You can claim up to $5,000 per employee for 2020. For 2021, the credit can be up to $7,000 per employee per quarter.
How do you know if your business is eligible?
To qualify, your business must have been negatively impacted in either of the following ways:
- NA government authority required partial or full shutdown of your business during 2020 or 2021. This includes your operations being limited by commerce, inability to travel or restrictions of group meetings.
- NGross receipt reduction criteria is different for 2020 and 2021, but is measured against the current quarter as compared to 2019 pre-COVID amounts.
- NA business can be eligible for one quarter and not another.
- NInitially, under the CARES Act of 2020, businesses were not able to qualify for the ERC if they had already received a Paycheck Protection Program (PPP) loan. With new legislation in 2021, employers are now eligible for both programs. The ERC, though, cannot apply to the same wages as the ones for PPP.
Two Ways To Qualify
EITHER – OR
A Decline In Revenue
A Change In Your Operations
What Qualifies As A Change In Your Operations?
Here are some impacts to consider that qualify your business for the Employee Retention Credit:
- Change in business hours
- Partial or full suspension of your operations
- Shutdowns of your supply chain or vendors
- Reduction in services offered
- Reduction in workforce or employee workloads
- A disruption in your business (division or department closures)
- Inability to visit a client’s job site
- Suppliers were unable to make deliveries of critical goods or materials
- Additional spacing requirements for employees and customers due to social distancing
- Change in job roles/functions
- Tasks or work that couldn’t be done from home or while transitioning to remote work conditions
- Lack of Travel
- Lack of Group Meetings
F.A.Q.
Do I still qualify if there was no revenue decline?
There are two ways to qualify: EITHER a change in your operations OR a revenue decline. You do not need a revenue decline to qualify, in fact many businesses had a revenue increase and still qualified.
When does ERC end?
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, businesses can now qualify for the ERC even if they already received a PPP loan. Note, though, that the ERC will only apply to wages not used for the PPP.
How is PPP subtracted or accounted for?
We can’t use wages covered by PPP loans and apply them to ERC. There is a “no double-dipping” rule governing the interplay of an employer’s forgiven PPP loan and its eligibility for ERC.
Is the commission paid to BLC a tax-deductible expense?
Yes, for example, if a company’s ERC refund was $100 and BLC commission was $30 then the company would lose taxable expense deductions for the net $70 and the net effect would be an increase to its taxable income.
Is the ERC refund considered taxable income?
The refund is a deduction in the payroll expense for the period that the credit is for. The interest that the IRS pays on the credit is considered taxable income in the period that the payment is received.
Will I get audited?
As with any fillings that are done with the IRS there is always a chance that you can get audited, however, with the volume that the IRS is processing and their short staff levels it is highly unlikely, the audit rate for employment-related tax returns for the last year that the data was available for was under 3 per 10,000 returns. In the unlikely event that you do get audited, while we can’t represent you we will assist by providing all of the supporting documentation to back up the work that we did.
Do we still qualify if we remained open during the pandemic?
Yes. To qualify, your business must meet either one of the following criteria:
- Experienced a decline in gross receipts by 20%, or
- Had to change business operations due to government orders
Many items are considered as changes in business operations, including shifts in job roles and the purchase of extra protective equipment. The ERC, in this case, also applies only for Q3 and Q4 of 2021. Businesses can qualify, regardless of the number of full-time employees.
Most Relevant Industries
- NAuto Repair Shops
- NBars
- NCar Washes
- NChurches / Temples
- NContractors & Construction Companies
- NCountry Clubs
- NDoctor / Veterinarian Offices
- NDry Cleaners
- NFranchisees
- NGyms
- NHotels
- NManufacturers
- NMoving Companies
- NParking Garages
- NPrivate Schools
- NProperty Managers
- NRestaurants
- NRetailers
- NSenior Living & Retirement Communities
- NSports Facilities
- NTrade Show & Conference Organizers
- NWholesalers
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