Even if businesses received loans due to COVID-19 woes, there is still a window of opportunity to receive a credit per employee that was kept on staff during the pandemic. Employee retention credit (ERC) is a refundable federal tax credit that was designed to encourage employers to keep employees on payroll during the pandemic. Although this service was only available for tax years 2020 and 2021, many businesses are still eligible to file for credit. In fact, if your business suffered from the COVID-19 pandemic, you may still qualify for employee retention credit up to $26,000 per employee.
The Employee Retention Credit program was developed to help businesses in a multitude of ways as they navigated the difficulties of the pandemic. ERC was able to help organizations recover from the economic shutdown caused by COVID, and make up for lost revenue. It also aimed to help retain employees and continue business operations as usual during hard times. Not all businesses qualify for ERC, however, many do and do not even realize the benefits that they are missing out on.
A business may fit one or many of the criteria needed to file for ERC benefits. One of the main deciding factors is whether or not the business experienced a true decrease in revenue due to the pandemic. This decline is characterized by a significant decline in 2020, and a general decline in 2021. ERC is also qualified for and claimed on a quarterly basis, comparing each quarter’s gross receipts to those of pre-pandemic operations in 2019. Another factor that affects ERC eligibility is where in the world the organization is operating. Regardless of size, to qualify for employee retention credit, a business must be operating in the US. This includes but is not limited to, colleges and universities, retail, industrial, non profits, and other important industries.
Experiencing a full or partial suspension from government authorities that changed business operations is also a factor that goes into ERC eligibility. If an organization experienced limited business hours, shut downs in the supply chain, or any form of reduced operations, it has a high likelihood of qualifying for credit. Finally, being recognized as a recovery startup business in the third or fourth quarter of 2021 helps to boost ERC eligibility.
It is important to keep in mind that employee retention credit requires qualifying wages. This means that credit amounts are based on whether an employer had more or less than 100 or 500 average full-time employees in 2019. These numbers are then used to determine the final eligibility of the company for credit.
It is not beyond most financial experts that filing for ERC can be taxing and confusing. It is because of this that many professionals are dedicating their skills and services to ensuring that businesses know how to reap these benefits that they deserve. With aid on everything from consultations, to document uploads, to payroll and pandemic impact reviews, there are experts at every turn there to assist businesses with this process. More highly trained teams of attorneys and CPAs are emerging now more than ever to ensure that no business fights for their money alone.
