Employee Retention Tax Credit (ERTC)
You might qualify if:
- Your business operations were impacted or changed due to a COVID-19 related government order.
- For quarters in 2021, If your business revenue has dropped by more than 20% in gross receipts compared to the same quarter in 2019 or to the immediately preceding quarter.
- Businesses that received PPP loans in 2020 or 2021 can still claim the ERTC. However, wages paid with the PPP loan that are forgiven do not count as qualifying wages for the credit.
What is the Employee Retention Tax Credit (ERTC)?
The Employee Retention Tax Credit (ERTC) is an IRS tax credit designed to help small businesses retain their employees during these difficult times. The credit refunds payroll costs already spent.
There is no need to pay back the ERTC, and is in a sense, similar to the stimulus check that the everyday taxpayer received. Any business structure under 500 employees can potentially qualify. This includes even non-profits and start-ups.
How does the process work?
How do I know if I qualify?
In order to qualify for the ERTC your business had to have been affected in one of two ways.
A decline in gross receipts over a declared quarter. Over any declared quarter in 2020, a decline of 50% or more must be shown to claim the credit; however the credit is capped at $5,000 for the year. In 2021 the credit was expanded for businesses who only experienced a 20% reduction in revenue. For each individual quarter in 2021 businesses can be eligible for up to $7,000 in credits per employee.
Either a “Complete or Partial” Closure of your business. All across the United States, local government restrictions and mandates were put into place; social distancing, being compelled to work from home, or even the closure of your business in its entirety.
What if I claimed PPP?
Don't worry, you might still be eligible! A common misconception is that PPP borrowers are ineligible for the ERC. While this was true originally in 2020 when the bill was passed, the rules have since changed.
Eligible businesses can now claim the credit retroactively. Since both the PPP and the ERTC can now be claimed, businesses can now get the aid and support they need to survive these difficult times.