The Employee Retention Credit (ERC) can still be claimed in 2022 despite ending on October 1, 2021. Employers can retroactively go back to March 13, 2020, and claim wages until October 1, 2021. With the many changes to original guidelines and regulations, the credit has become intimidating and confusing for many. Fortunately, there have been no basic rules and deadline changes for months now.
In spite of the lucrative benefits presented by this tax credit, only 10% of business owners have claimed the credit for both tax years 2020 and 2021. There are tens of billions of dollars being left on the table by those employers that are not claiming the credit. While many simply do not know about the tax credit, others have been found to prematurely disqualify their enterprise based on outdated guidelines. Even more, there are a host of misconceptions surrounding the credit. For example, even if an employer made more money during the pandemic than said employer did in prior years, they may still qualify for the ERC.
What is the Employee Retention Credit?
The ERC is a refundable payroll tax credit worth up to $26,000 per W-2 employee. The ERC has been a gamechanger for many employers, made available through the CARES Act. This is yet another injection of cash for businesses across the country, similar to the Paycheck Protection Program (PPP) loans you may have received in 2020 and/or 2021.
For each employee, wages up to $10,000 for 2020 can be counted to determine the amount of the 50% credit. For 2021, the Federal Government boosted the credit to 70% against the first $10,000 in wages per quarter (quarters 1, 2, 3). Each employee is worth up to $5,000 for 2020 and $21,000 for 2021. Because this credit can apply to wages paid after March 12, 2020, many employers who are/were struggling can get access to said credit and gain much-needed relief.
My CPA told me I do not qualify
One of the most common misconceptions concerning the Employee Retention Credit (ERC) is that you are not eligible for the ERC if you received a Paycheck Protection Loan (PPP). This is far from the truth. PPP loan recipients are still potentially eligible for the ERC. The only difference between PPP loan recipients and non-recipients is that you can not double-dip on wages funded with PPP monies. So, as long as your enterprise is eligible, taking the ERC is a no-brainer. Remember, this is a refund on payroll taxes that you already paid to the Federal Government, plus any calculated surplus in credit. Every dollar that is calculated is money rightfully owed to the enterprise.
Another common misconception is that in order to qualify, an enterprise must experience both a reduction in gross receipts AND suffer from a partial disruption due to state mandates. This is another case that is far from the reality of the situation.
How do I qualify for the ERC?
- partial/full shutdown due to government mandates and restrictions
- supply chain interruptions and delays
- inability to work with vendors either domestically or internationally
- capacity limitations due to social distancing (i.e., restaurants operating at 50%)
- a drop in product or service output due to the pandemic (i.e., manufacturers' throughput diminished)
- reduced hours of operation due to government mandate
- required sanitation/cleaning protocol due to government mandate
How to claim the credit in 2022
Your head may be spinning at this point as you wonder if your business is eligible for the credit or not. If your business was subjected to any of the above line items, your business is eligible for the ERC. Do not leave tens of thousands of dollars or, in many cases, hundreds of thousands of dollars on the table. This money is rightfully owed to you for payroll taxes you have already paid, plus any surplus provided by the computations prepared for your enterprise.
ERT Credit has calculated the ERC credit for hundreds of employers across the country and continues to actively process both computations and amended returns for employers.
We can answer your questions and assist you with the employer retention credit, CARES Act, tax consulting, and filing options. Do not hesitate — contact us to make sure you receive all credits your business qualifies for. Click here to reach out to us for more information.