Get Paid for Keeping Your W2 Employees During The Pandemic, Even If You Received a PPP loan.
The Employee Retention Credit (ERC) is the federal government’s response to the COVID-19 pandemic as part of the CARES Act to encourage business owners to retain employees during that time. Businesses that received PPP loans did not qualify for this program initially. This policy was later amended to enable business owners to qualify for ERC tax credits and lowered the requirement of business disruption to qualify.
If your business had W2 employees in 2020 and/or 2021, it could benefit from learning about this program which can alleviate your business cash flow. Funds are still available and businesses can apply retroactively by submitting an Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, Form 941-X, with a three-year deadline from the date of the original 941 filings.
Here are some of the basics about this program and offered resources in our previous webinar.
To identify if your business qualifies for the ERC for a given filing period, determine whether:
The business was fully or partially shut down due to a governmental order during any part of the quarter, or
The business gross receipts in a quarter declined more than 20% compared to either (a) the same quarter in 2019 or (b) the immediately preceding quarter in 2020 or 2021 or
The business was affected by supply chain disruption
If the answer to at least one question is YES, and
The business kept its W2 full-time employees on the payroll, and
Had 500 or fewer employees…
…Then wages paid may count towards the ERC tax credit, of up to $26,000 per year.
There are a few other nuances to the eligibility and qualifiable amount to consider. If the business received PPP loans in 2020 or 2021, they can still claim the ERC. However the wages used to obtain the PPP loan forgiveness cannot also be claimed as ERC wages (no double counting), but the remaining wages may be eligible for the credit.
Also, the ERC is available for the 4th quarter of 2021 for certain small businesses that opened after February 15, 2020. If they had annual gross receipts of less than $1 million, then they may claim ERC of up to $50,000 per quarter, even if the businesses have not been shut down or experienced declines in revenue.
We encourage you to seek professional advice to identify if you qualify or what you need to do to obtain this tax credit.