As we talk with small businesses across the U.S., we find that many business owners have seen the headlines about the ERC ending, and they think they can no longer qualify. Nothing can be further from the truth. The last quarter for which wages can be eligible for the Employee Retention Credit is September 30, 2021. However, employers have three years from the date of filing to claim their credits. That means that for returns filed for the second quarter of 2020, they can file up until July 2023.

If you are like most businesses, you have been negatively impacted by the COVID-19 pandemic. Businesses across the country suffered shutdowns, layoffs, and shortages. It’s been a trying time to be a business owner, to say the least. And the financial hardships seem to keep coming with every new variant. How can you get ahead and claim Employee Retention Credits (ERC) relief for your business before time runs out? At ERC Specialists, we’ve got the answers!

What is the ERC Tax Credit?

Congress created the ERC program, which was part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). This program seeks to encourage and reward business owners that have retained employees throughout the COVID-19 pandemic. The program gives business owners the opportunity to qualify for ERC tax credits, regardless of whether they received PPP loans.

What this means to you is that you may now be eligible for ERC tax credits of up to $33,000 per employee. What a relief! But now comes the hard part.

Qualifying for the ERC Tax Credit

There are numerous eligibility requirements for receiving ERC funds. These were issued by IRS notices and included things like the following:

● You may qualify if your business has experienced a partial or complete suspension of operations, such as:

○ Capacity impacts due to social distancing requirement

○ Reduced hours of operation

○ Delays and disruptions of your supply chain

○ On-site work or client meeting restrictions

○ Delays or suspensions of distribution

● You may qualify if your business has experienced a significant reduction in revenue during any quarter of 2020 or 2021 as compared to 2019. For example:

○ 2020 – 50 percent decrease in revenue/quarter

○ 2021 – 20 percent decrease in revenue/quarter

New Rules, Just Right

Though the original program was scheduled to end on December 31, 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended the ERC through June 30, 2021. One of the most important updates for business owners came via IRS Notice 2021-20, which provided new guidance allowing employers who accepted PPP loans to be eligible for the ERC tax credit retroactively to March 2020.

Now businesses that were impacted by COVID-19 can claim the ERC tax credit for each W-2 employee retained from March 12, 2020 through September 30, 2021. Additionally, the threshold for full-time employees increased from 100 employees to 500 in order for small businesses to qualify for ERC, which means you can now collect the funds even with a larger employee base.

If your business was partially or fully suspended, required to limit business hours, or experienced a 20 percent or more revenue reduction vs the same quarter in 2019, you may be eligible for a significant ERC tax credit. In fact, businesses that qualify for both 2020 and 2021 ERC tax credits may receive up to $26,000 per eligible employee.

That’s right. You may be eligible for up to $26,000 per employee!