3 Reasons Why Your Business May Qualify for the Employee Retention Credit
If your small or medium-sized business hasn’t applied for the Employee Retention Credit (ERC) — also called the Employee Retention Tax Credit (ERTC) — you could be missing out on an opportunity to get money back into your business.
Part of the CARES Act, the ERC was first created to support businesses that were negatively impacted by COVID-19 in 2020. Later, the ERC was extended to include the first three quarters of 2021, thanks to the Consolidated Appropriations Act of 2021.
With the ERC, eligible small and medium-sized businesses can get anywhere from up to $5,000 per employee kept on the payroll for 2020 and up to $7,000 per employee for each of the first three quarters of 2021. This is a total potential benefit of up to $26,000 per employee for 2020-2021. Below, we’ll outline three reasons why your business may qualify for the ERC.
#1. Your business operations were impacted by COVID-19 in 2020 or 2021
During America’s intense battle against COVID-19, the government ordered full or partial shutdowns of businesses in many areas across the country. If you’re an eligible small or medium-sized business owner and were forced to stop or partially halt your operations during this time, your business may qualify for the ERC.
However, “halted operations” include more than just shutting your business’s doors. Your company may also qualify for the ERC during the qualifying year(s) for the following reasons:
- Experienced travel limitations
- Was unable to hold necessary group meetings
- Was impacted because suppliers were unable to provide crucial products or materials
- Had to reduce its product or service offerings
#2. Your business revenue declined in any quarter from Q1 2020 to Q3 2021
Even if your business’s doors never closed and its meetings and travel continued as planned, it could still qualify for the 2020 ERC if its gross receipts for any quarter of 2020 were reduced by 50% or more when compared to the same quarter of 2019.
When applying for the 2021 ERC, you only need to show that your company’s revenue decreased by 20% or more for any of the first three quarters of 2021, when compared to the same quarter in 2019. This means that even if your business didn’t qualify for the 2020 ERC, it may qualify for the 2021 ERC.
#3. Your business kept employees on payroll
Qualifying small or medium-sized businesses for the 2020 ERC had 100 or fewer full-time employees (based on your payroll from 2019). For the 2021 ERC, this was increased to 500 or fewer employees on your payroll in 2019.
If your small or medium-sized business meets the employee count, was impacted by COVID-19 , and kept employees on payroll, it may be eligible to receive the ERC.
Estimate your company’s potential ERC refund with Innovation Refunds
If you think your business may qualify for the ERC, the independent tax attorneys and CPAs at Innovation Refunds can help determine its potential refund. Thousands of companies have already qualified for the ERC, however, the ERC deadline is approaching. By working with an ERC originator, your business can potentially unlock more capital than if you were to work with a standard CPA who may not be aware of the ERC’s nuances.
Innovation Refunds is a great first step to getting your company funds it may qualify for from the U.S. Treasury, so it can start to recover from COVID-19’s impact and continue growing its team, products, and services.