Established by the CARES Act, the employee retention credit (ERC) was designed to incentivize employers to maintain their staff in the midst of the coronavirus pandemic. Originally, recipients of Paycheck Protection Program (PPP) loans were barred from claiming the ERC; however, in December of 2020, the Consolidated Appropriations Act made the ERC available to PPP loan recipients for use on wages that were not paid with forgiven PPP loan funds.
If you did not claim the ERC for 2020 and/or 2021, you should be sure to review the credit qualifications. If you qualified for the ERC during either year, you can file an amended Form 941X to retroactively claim the credit. Businesses still interested in filing for the ERC need to do so by March 12, 2023.
In order to qualify to claim the ERC, for the calendar quarter in which you claim the credit, you must meet at least one of two criteria:
- Your business was fully or partially shut down as a result of a government order stemming from the coronavirus pandemic, and/or
- Your business experienced a significant decline in gross receipts
The definition of a “significant decline in gross receipts” in regards to the ERC is different for 2020 and 2021:
- For 2020, a business must have experienced at least a 50% drop in gross receipts for the quarter, compared to the corresponding quarter in 2019. Additionally, to qualify, a business must have had 100 or fewer full-time employees, excluding the owners.
- For 2021, a business must have experienced at least a 20% drop in gross receipts for the quarter, compared to the corresponding quarter in 2019. Additionally, to qualify, a business must have had between 1 and 500 full-time W-2 employees, excluding the owners.
Need Help Claiming the ERC?
If you think you may qualify for the ERC for any quarter of 2020 or 2021, the time to act is now. Ross Buehler Falk & Company has extensive experience helping clients claim the ERC. We are here to answer your questions and assist you with making the most of the tax opportunities available to you. Contact us today.