Supply Chain Issues and the Employee Retention Credit
Qualifying Disruptions for ERC Benefits
Let’s say your restaurant has 50 tables, but social distancing requirements forced you to limit seating to just half capacity at 25 tables. That constitutes a partial shutdown, and you may qualify for the ERC tax credit.
How about if your packaging supplier could only fulfill 70 percent of your order because of governmental restrictions, and it reduces your ability to sell your products? That is considered a qualifying disruption. Even if your company is open and serving customers at full capacity, the supplier’s issues could still be considered a partial suspension.
Perhaps you run a hotel and you’re putting millions of dollars into a renovation. Your lobby furniture was set to arrive over a year ago, but it has still not been delivered. You’ve had to cancel promotions and press events that were scheduled around the renovation as the timeline keeps being pushed back.
Of course, your financial impact should be significant and must be substantiated. Our team at ERC Specialists can help you prepare the appropriate documents to demonstrate the impact of supply chain issues on your business. If you meet either of the following three criteria, you’ll want to reach out to us immediately to get started on your ERC funding application, as there is a statute of limitations on the credit.
- Full or partial suspension: Your business was either completely or partially suspended as a result of government restrictions that limited commerce, travel or group meetings due to the COVID-19 pandemic.
- Significant decline in gross receipts: Your business experienced a significant decline in gross receipts in any quarter in 2020 or 2021 as compared to the same quarter in 2019. Significant decrease is defined as 50 percent less than 2019 during any quarter of 2020; in 2021, it’s 20 percent.
- Supply Chain Issues and the Employee Retention Credit: Supply Chain Disruption can be anything from delayed supplies, changes in product, change in packaging, etc. For example, many restaurants weren’t able to get certain types of meat, paper towels or carryout containers during the pandemic. Delivery companies couldn’t get truck parts or scanners. Hotels were unable to receive furniture, towels and sheets due to ports being shut down, which delayed renovation plans. These impacts qualify a company regardless of revenue gain or loss.
How Much Can I Get from the ERC Tax Credit?
The maximum credit in 2020 is equal to 50 percent of eligible employee wages (up to $10,000 per year), which equals a $5,000 credit per employee for the calendar year 2020.
In 2021, the maximum credit is equal to 70 percent of eligible employee wages (up to $10,000 per quarter), which equals a $7,000 credit per employee per quarter.
That means if you are eligible to receive ERC funding for the full coverage period, your maximum credit is $26,000 per W-2 employee.
At ERC Specialists, we have the payroll and tax expertise you need to help your business understand its eligibility and assist you in preparing the documentation you need to get ERC funding quickly. Don’t wait, Congress has only allocated a fixed amount of money to the ERC tax credit so businesses need to file promptly to get their share. Claim your valuable small business covid relief ERC tax credits today!
Qualifying Disruptions for ERC Benefits
Let’s say your restaurant has 50 tables, but social distancing requirements forced you to limit seating to just half capacity at 25 tables. That constitutes a partial shutdown, and you may qualify for the ERC tax credit.
How about if your packaging supplier could only fulfill 70 percent of your order because of governmental restrictions, and it reduces your ability to sell your products? That is considered a qualifying disruption. Even if your company is open and serving customers at full capacity, the supplier’s issues could still be considered a partial suspension.
Perhaps you run a hotel and you’re putting millions of dollars into a renovation. Your lobby furniture was set to arrive over a year ago, but it has still not been delivered. You’ve had to cancel promotions and press events that were scheduled around the renovation as the timeline keeps being pushed back.
Of course, your financial impact should be significant and must be substantiated. Our team at ERC Specialists can help you prepare the appropriate documents to demonstrate the impact of supply chain issues on your business. If you meet either of the following three criteria, you’ll want to reach out to us immediately to get started on your ERC funding application, as there is a statute of limitations on the credit.
- Full or partial suspension: Your business was either completely or partially suspended as a result of government restrictions that limited commerce, travel or group meetings due to the COVID-19 pandemic.
- Significant decline in gross receipts: Your business experienced a significant decline in gross receipts in any quarter in 2020 or 2021 as compared to the same quarter in 2019. Significant decrease is defined as 50 percent less than 2019 during any quarter of 2020; in 2021, it’s 20 percent.
- Supply Chain Issues and the Employee Retention Credit: Supply Chain Disruption can be anything from delayed supplies, changes in product, change in packaging, etc. For example, many restaurants weren’t able to get certain types of meat, paper towels or carryout containers during the pandemic. Delivery companies couldn’t get truck parts or scanners. Hotels were unable to receive furniture, towels and sheets due to ports being shut down, which delayed renovation plans. These impacts qualify a company regardless of revenue gain or loss.
How Much Can I Get from the ERC Tax Credit?
The maximum credit in 2020 is equal to 50 percent of eligible employee wages (up to $10,000 per year), which equals a $5,000 credit per employee for the calendar year 2020.
In 2021, the maximum credit is equal to 70 percent of eligible employee wages (up to $10,000 per quarter), which equals a $7,000 credit per employee per quarter.
That means if you are eligible to receive ERC funding for the full coverage period, your maximum credit is $26,000 per W-2 employee.
At ERC Specialists, we have the payroll and tax expertise you need to help your business understand its eligibility and assist you in preparing the documentation you need to get ERC funding quickly. Don’t wait, Congress has only allocated a fixed amount of money to the ERC tax credit so businesses need to file promptly to get their share. Claim your valuable small business covid relief ERC tax credits today!
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ERC Specialists is a specialty payroll company exclusively dedicated to understanding and maximizing the CARES Act Employee Retention Credit (ERC) for small businesses affected negatively by COVID 19.
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