Can my business benefit from a Federal ERC?
Qualifying Businesses may be entitled for up to $33,000/employee.
The Employee Retention Credit (ERC) may be America’s best kept secret. It is estimated that less than 30% of eligible businesses have taken advantage of it!
ERC was signed into law as part of the CARES Act in March of 2020, entitling eligible employers to this credit against Federal Employment taxes. When first introduced, however, businesses could not claim both, a Paycheck Protection Program (PPP) loan and an ERC. However, changes to this law made in December 2020 and again in March 20201 extended the program, increased payments, and retroactively relaxed eligibility requirements. Most significantly, PPP recipients are no longer restricted from also receiving an ERC!
Business may retroactively claim a 2020 ERC if they had less than 100 Full-Time W2 employees; this was expanded to 500 W2 employees for a 2021 ERC.
They must also meet either Condition 1 or Condition 2:
Condition 1 – Covid-Related Government Restriction
- Businesses whose operations had been suspended or curtailed by a Covid-related government order. Example: Restaurants, Gyms, and Personal Services that had their indoor capacity closed or limited.
Condition 2 – Gross Revenue Reduction
- 2020: Any business who had a 50% drop in Gross Receipts in any quarter of 2020, compared to the same quarter in 2019.
- 2021: Related to any business who had a 20% drop in Gross Receipts in any quarter of 2021, compared to the same quarter in 2019 or 2020, as elected by the business.
How Large is the Credit?
- 2020: 50% of first $10,000 in wages and benefits paid to qualified employees during impacted periods* (up to $5000 per employee for all of 2000).
- 2021: 70% of the first $10,000 in wages per quarter. (up to $7,000/employee per quarter = $28,000/employee for all of 2021)
Is there a Catch?
There is no catch, but there are some complexities. For example, while you can claim both a PPP and an ERC, those salaries that were subsidized by a forgiven PPP loan, cannot be also used as the basis for an ERC Credit. Yet, in our experience, businesses like Restaurants, Hotels, Dry Cleaners, Hairdressers, and many Retailers, are able to claim a sizeable ERC, even after backing out PPP funded salaries.
Filing for an ERC can be complex. The financial and tax experts at plaata.com/erc can help you get the funds that you are entitled to. They have the specialized knowledge and experience to handle the entire ERC filing process for you, and maximize the Credit for which your business will qualify.