This COVID Tax Credit for Businesses Is Still Available
The impact of COVID-19 may still be impacting your business. Aside from continuing inflation, businesses across the U.S. are finding ways to save on costs while still providing the same level of quality to their customers and clients. If your business was impacted by COVID-19 restrictions and lockdowns in the 2020 tax year, you may be eligible to save some money.
The Employee Retention Tax Credit (ERC) is available for businesses looking to recoup the cost of staying open or paying staff wages between March 12, 2020 and January 1, 2021. Under the CARES Act, the federal government established this tax credit to help businesses who paid qualified wages to employees during lockdowns and government restrictions and businesses who saw their gross receipts decline by over 50% in comparison to 2019.
What Businesses Qualify for the ERC Tax Credit?
The ERC tax credit is available to businesses across several industries who either paid qualified wages to employees while business operations were halted or restricted or businesses who saw a decline of over 50% in gross receipts compared to that same tax quarter in 2019.
For example, a restaurant that was closed due to a government lockdown that still kept employees on payroll could be eligible. At the same time, a restaurant who was only able to do takeout orders and still kept employees on payroll could also be eligible. In another example, a tech company that allowed its employees to work from home to keep working the same hours could also be eligible.
Businesses cannot have more than 100 employees to apply for the employee retention credit. In addition, if your business received PPP loan forgiveness, you cannot use the same qualified wages towards ERC, even if the loan is paid off.
Did your business experience significant financial hardship between March 13, 2020 and January 1, 2021? You will be qualified for ERC if your gross receipts is less than 50% in 2019 for the same tax quarter. However, the same rules apply: less than 100 employees and may not qualify if you received PPP.
How Much Money Is the ERC Tax Credit Worth?
Through ERC Tax Credit, businesses could receive up to $21,000 per employee. To calculate your ERC tax credit, you cannot use wages that were reported for PPP loan forgiveness or EIDL. For 2020, the ERC claim is calculated in aggregate for the year. In 2021, the ERC claim is calculated separately for each quarter.
When Will I Receive My ERC Tax Credit?
Due to the IRS’ report of delays in refunding claims, it is best not to wait for the deadline to apply. The sooner you apply, the closer you are to receiving the credit. You do not want to be stuck waiting in excess of 9 months to receive your credit, especially since the money is aimed towards businesses in need of financial relief. The best thing you can do is hire an ERC consultant to expedite the process.
