Did you keep people employed in 2020 or 2021? Your organization may be eligible to earn millions of dollars in IRS returns through the Employee Retention Credit (ERC) program. It’s not too late to receive this employer tax credit!
Many employers who were not initially eligible for the ERC can now qualify due to recent expansions. The Taxpayer Certainty and Disaster Relief Act in late 2020 and the American Rescue Plan Act in 2021 opened up both eligibility and the amount of money available.
If your business has been impacted in any way by COVID-19, continue reading to learn more about the ERC program and whether your organization qualifies for the tax credit. Or, contact us today to get qualified and see how much you can get back through this program.
About the ERC Employer Tax Credit
The Employee Retention Credit (ERC) is a refundable payroll tax credit that was initially created through the CARES act to help businesses impacted by COVID-19. Since the tax credit was created, the federal government has expanded eligibility to include many more organizations than initially qualified.
Through the ERC, qualified organizations can receive up to $33,000 in tax credits per employee. You can receive up to 70% back on up to $10,000 in quarterly wages paid per employee in 2021 (up to $7,000 for each quarter), plus up to 50% back in retroactive payments on up to $10,000 in annual wages paid per employee in 2020 (up to $5,000 for the year).
The federal government created the ERC program to encourage employers to keep employees on payroll throughout the COVID-19 pandemic. This tax credit can make an enormous impact on your bottom line.
Common ERC Myths
Many CEOs wrongly believe their organization does not qualify for this tax credit because of misperceptions and outdated information, largely because the rules have changed since the program began. Here are a few common myths:
- Myth #1: Essential businesses can’t qualify for the ERC. Reality: Many essential businesses are now eligible for the ERC, especially if you were unable to obtain critical goods or materials or experienced a significant decline in gross receipts.
- Myth #2: Profitable businesses aren’t eligible. Reality: Your business may qualify for the ERC even if you were profitable this year.
- Myth #3: Businesses whose revenue didn’t drop aren’t eligible. Reality: Your business may qualify for the ERC even if your revenue stayed the same or increased.
- Myth #4: You only qualify if your business shut down at some point. Reality: Your business can qualify for the ERC even if you never had to shut down.
- Myth #5: Nonprofits aren’t eligible. Reality: Tax-exempt organizations are now eligible for the ERC.
- Myth #6: Businesses that received PPP loans don’t qualify. Reality: The rules have changed, and PPP recipients are now eligible for the ERC.
- Myth #7: If employees were not paid hourly wages or a salary, your business can’t qualify. Reality: For the purposes of the ERC, group health insurance may count as qualifying wages.
- Myth #8: It’s too difficult to get the ERC. Reality: Qualifying for the ERC is easy when you get professional support from an ERC specialist.
Are you ready to find out how much your organization can get back from this tax credit? Reach out to our team of ERC specialists today!
How to Qualify For the Employer Tax Credit
To qualify for the ERC, your organization generally must have either: a) been fully or partially suspended at some point during 2020 and/or 2021, or b) experienced a reduction in year-over-year gross receipts of up 50% in 2020 or 20% in 2021. Essential businesses whose suppliers were impacted by shutdowns may also qualify.
There are many different definitions of suspension and wages in this context, so don’t assume your organization doesn’t qualify. Here are a few quick facts to show just how broadly the ERC applies:
- Group health plan expenses can be considered qualified wages even when no other wages are paid to the employee.
- Organizations that were partially shut down during COVID may qualify.
- Organizations that were unable to staff employees at sites may qualify.
- Organizations that saw a decrease in sales may qualify.
- Organizations that were impacted by social distancing requirements may qualify.
- Organizations that had special restrictions that affected staffing ability may qualify.
- Organizations that reassigned employees to non-revenue generating activities may qualify.
- Organizations that have otherwise seen limited workflow and productivity at any time in 2020 or 2021 may qualify.
The ERC is now available to employers of all sizes, including those that received PPP loans and some essential businesses. However, the amount of credit is determined differently for large and small employers. For employers with 500 or fewer employees, all wages may qualify for the ERC, while larger businesses have more restrictions on which wages may qualify.
At LG Resources, we can help you navigate through the many definitions of suspension and determine how much you are eligible to receive back through this tax credit. One of our partner companies consults with the House Finance Committee and co-authored the ERC, so we are aware of all the subtle nuances that could impact your eligibility.
How to Apply For the Employer Tax Credit
The most common way for employers to claim the ERC is through Form 941, although there are other methods we can help you with. You must report your total qualified wages and related health insurance costs for each quarter on your employment tax returns.
Get Assistance With Applying For the ERC
LG Resources can help you determine how much you are eligible to receive. We can help you review required payroll information and PPP wages, deliver an audit-ready package, and look for other credit opportunities. We will provide all instructions on how to maximize your speed of processing.
LG 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 tax credit opportunities
We are aware of all the intricate nuances of the ERC program and eligibility requirements, as one of our partner companies consults with the House Finance Committee and co-authored the ERC. We will give you written instructions on how to amend your forms so your full ERC returns come back to you, including returns for previous quarters and years.
It’s not too late to receive the ERC! If your business has been impacted by COVID-19, we can help you get qualified for the ERC program, today. Some organizations can get millions of dollars from this tax credit, depending on the number of employees retained, qualifying wages paid, and how COVID has affected the organization’s business so far.