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Think your business doesn’t qualify for the ERC? Think again. Many businesses that weren’t initially eligible can now qualify under the expanded rules.
The federal government recognizes many of the ways COVID-19 has impacted organizations in 2020 and 2021. As a result, a wide variety of businesses are eligible for up to $33,000 per employee in refundable payroll tax credits. These credits can add significantly to your company’s bottom line.
Check our list of ERC myths below to see if you may be eligible for the ERC after all, or contact us to learn more about your tax credit eligibility.
MYTH #1: ESSENTIAL BUSINESSES CAN’T QUALIFY FOR THE ERC.
REALITY: SOME ESSENTIAL BUSINESSES ARE NOW ELIGIBLE FOR THE ERC.
Many essential businesses that remained open were nevertheless impacted by shutdowns when certain suppliers were required to suspend operations. If an essential business was unable to obtain critical goods or materials due to a supplier’s suspended operations, they may be eligible for the ERC.
Similarly, an essential employer that experienced a significant decline in gross receipts during the pandemic may be eligible for a tax credit.
MYTH #2: BUSINESSES THAT WERE PROFITABLE THIS YEAR AREN’T ELIGIBLE FOR THE ERC.
REALITY: YOUR BUSINESS MAY QUALIFY FOR THE ERC EVEN IF YOU WERE PROFITABLE THIS YEAR.
To be eligible, your business must have been fully or partially suspended by government orders, or have experienced a reduction in year over year gross recipients of 50% in 2020 or 20% in 2021. Some businesses may meet the requirements for the ERC even if they were profitable in 2020 or 2021.
MYTH #3: IF YOUR REVENUE DIDN’T DROP BY AT LEAST 20%, YOU CAN’T QUALIFY FOR THE ERC.
REALITY: YOU MAY STILL QUALIFY FOR THE ERC EVEN IF YOUR REVENUE NEVER DROPPED SIGNIFICANTLY.
Businesses that were fully or partially suspended by government orders may be eligible for the ERC, regardless of how much or little of a revenue drop they experienced.
There are many definitions of what suspended means. At LG Resources, we can help you navigate these and other important questions about the tax credit. One of our partner companies, who consults with the House Finance Committee, co-authored the ERC, and we can help you understand the nuances around eligibility.
MYTH #4: YOU CAN ONLY QUALIFY FOR THE ERC IF YOUR BUSINESS SHUT DOWN.
REALITY: YOU MAY QUALIFY FOR THE CREDIT EVEN IF YOUR BUSINESS NEVER SHUT DOWN.
Businesses that continued to operate throughout the pandemic were often still negatively impacted by COVID-19, and the federal government understands this. Businesses that did not shut down, but experienced a reduction in year over year gross recipients of 50% in 2020 and/or 20% in 2021 are still eligible for the ERC.
MYTH #5: NONPROFITS AREN’T ELIGIBLE FOR THE ERC.
REALITY: NONPROFITS AND OTHER TAX-EXEMPT ORGANIZATIONS MAY QUALIFY FOR THE ERC.
Tax-exempt organizations have been deemed to be engaged in a business or trade for the purposes of the ERC, so they are eligible. Some schools, hospitals, museums, performing arts centers, churches, and other nonprofits have already taken advantage of the credit.
MYTH #6: BUSINESSES THAT RECEIVED PPP LOANS DON’T QUALIFY FOR THE ERC.
REALITY: THE RULES HAVE CHANGED, AND BUSINESSES THAT RECEIVED PPP LOANS CAN NOW QUALIFY FOR THE ERC.
Initially, the ERC was not available to businesses that had received PPP loans. However, more employers are now eligible due to changes in late December of 2020. Congress revised relief options available to businesses affected by the pandemic, including refundable credits for retaining employees in both 2020 and 2021.
The expansions create opportunities for previously excluded PPP recipients. PPP recipients can qualify for ERC with respect to wages that are not paid for with PPP proceeds.
MYTH #7: IF EMPLOYEES WEREN’T RECEIVING ANY COMPENSATION OTHER THAN HEALTH INSURANCE, YOUR BUSINESS CAN’T QUALIFY FOR THE ERC.
REALITY: GROUP HEALTH INSURANCE MAY QUALIFY AS WAGES FOR THE PURPOSES OF THE ERC.
Consistent with IRS guidance, group health plan expenses can be considered qualified wages even when no other wages are paid to the employee.
MYTH #8: IT’S TOO DIFFICULT TO FIGURE OUT HOW TO GET THE ERC.
REALITY: LG RESOURCES CAN HELP YOU DETERMINE ELIGIBILITY AND CLAIM YOUR TAX CREDIT, FREE OF CHARGE.
It’s not too late to receive the ERC! If your business was impacted by COVID-19, we can help you get qualified for the ERC program, today.
One of our partner companies consults with the House Finance Committee and co-authored the ERC. We are aware of all the intricate nuances of this credit.
Our team can help you:
- Determine eligibility based on full/partial suspension or a gross receipts test
- Determine eligibility even if you’re an essential business or didn’t see a decrease in revenue
- Review required payroll information and PPP wages
- Determine credit availability and deliver an audit-ready package
- Look for other credit opportunities to maximize incentives
Set up a free consultation with us today to learn more about your tax credit eligibility. Or, download our ERC eBook for more information about the ERC.
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