Employee Retention Credit (ERC) is a refundable tax credit that was developed in response to the COVD-19 pandemic and following economic shutdown. It was designed to encourage businesses to keep employees on their payroll and give them a credit if they did so. This quarterly tax credit is 50% to 70% of the employee’s pay depending on the year submitted and is up to $10,000 per quarter.
There’s a lot of confusion out there about ERC, and rightly so! There are multiple versions and conditions change quite a bit. That said, there are three general guidelines that the IRS cites for businesses to be considered to qualify:
Reduced or shut down operations due to COVID related government mandates during 2020 or 2021
Significant reduction in gross receipts during 2020 or 2021
Can be considered a ‘recovery startup business’ during third or fourth quarters of 2021
And then there’s a lot more bad information out there where employers assume they’re disqualified, and they’re not!
You’re eligible even if you’ve claimed PPP or had your PPP loan forgiven
You’re eligible even if your business was deemed essential and you continued to operate
Nonprofits are eligible
You’re still eligible even if your business grew during the pandemic!
If you haven't filed already, it’s not too late!
The Illinois CPA Society does a great job of going into more detail debunking myths/bad information related to ERC.
Whatever you decide to do, please heed the warning of the IRS and steer clear of unscrupulous third-party callers trying to file your ERC. This is a complex matter and we encourage you to talk with a tax professional to get a full understanding.
In short, a lot of businesses may qualify for a partial or full credit. If you’d like to learn more, we encourage you to make an appointment for a complimentary consultation and evaluation. When we hear the details pertinent to your business, then we’ll advise on your options. Please keep in mind, every situation is unique and what we’ve written out here are only guidelines.