Who Qualifies for the Employee Retention Credit?

Wondering if you can take advantage of the CARES Act Employee Retention Credit (ERC)? Eligible small business owners can still claim the ERC for eligible employees for all of 2020 and part of 2021.

Is My Small Business Eligible for the ERC?

While businesses of all sizes can benefit from ERC, the program favors small businesses over larger employers. Larger employers can claim the ERC but only for wages paid to employees not to work or for some qualified health costs.

How do you define a small business?

For the tax year 2020, a small business is defined as a business that averaged 100 or fewer full-time monthly employees in 2019. For the tax year 2021, the definition is expanded to include businesses that averaged 500 or fewer full-time monthly employees in 2019. For small businesses, you can claim the credit for all employees whether they worked or not.??

How do I know if my business qualifies?

To be eligible for the ERC, your business must have been impacted by either a government-mandated lockdown or a drop in revenue.?

• If your business was impacted by a full or partial suspension of operations because of a government COVID-19 order during any quarter, you can qualify. This includes restrictions on hours or capacity.
• Your business can also qualify if it experienced a “significant decline” in gross receipts as defined by the IRS. For tax year 2020, a significant decline means gross receipts for a quarter are less than 50% compared to the same period in 2019. For the first 3 quarters of 2021, it means quarterly gross receipts are less than 80% compared to the same period in 2019.

Here's a Snapshot of ERC Qualifications:

1. Number of employees

• Tax year 2020: 100 or fewer employees
• Tax year 2021: Fewer than 500 employees

2. Impacted by pandemic and meet one of the following conditions:

• Reduced revenue in 2020 or 2021 resulting from government mandates
• Drop in revenue
• Tax year 2020: less than 50% of 2019 receipts
• Tax year 2021: less than 80% of 2019 receipts

Your Next Step: Find Out if You're Qualified for ERC Funds

Figuring out your ERC eligibility can feel daunting. Let our team of experts do the heavy lifting for you. We've helped hundreds of happy clients successfully take advantage of this credit. ?? Call us now to speak with a licensed tax agent 866-900-9001 -- or send a message for a free consultation here.