How to Qualify
The ERC has gone through significant updates, so even if you and your advisor have reviewed this before, we encourage you to take another look with one of our specialists to uncover all qualifying activities and wages that will maximize your benefit and/or refund. Unfortunately, the program is not yet living up to its full potential because many business owners are prematurely disqualifying themselves due to misinformation and rumors about who does or doesn’t qualify.
The overarching theme for businesses to focus on is how the coronavirus pandemic impacted our economy as a whole…so even if your business grew or was deemed an essential business during the pandemic, there are more qualifying factors to look at before you disqualify yourself.
This payroll tax credit is available to essential and non-essential businesses in any industry who endured the effects of the pandemic. Government-mandated shutdowns—on federal, state, and local levels—are a major factor that many business owners had to adapt to over the last year. For example, a restaurant that could not let customers dine indoors or a manufacturer that had to slow their operations due to new health and safety restrictions are a couple of examples that business owners present to us every day.
Here are some impacts to consider that qualify your business for the Employee Retention Credit:
- Full shutdowns
- Partial shutdowns
- Interrupted operations
- Supply chain interruptions
- Inability to access equipment
- Limited capacity to operate
- Inability to work with your vendors
- Reduction in services or goods offered to your customers
- Cut down in your hours of operation
- Shifting hours
Mechanics of ERTC
Helping Business Owners Qualify for Employee Retention Tax Credits
The Employee Retention Tax Credit (ERTC)
is a credit that was first put in place in 2020 as a temporary coronavirus relief provision. After numerous head-spinning alterations and clarifications, the most recently passed American Rescue Plan Act (ARPA) yet again extended and modified the ERTC. According to the ARPA, the ERTC now also applies to wages paid in all of 2021.
Thus, an eligible employer can now claim the refundable ERTC against applicable employment taxes (*) equal to 70% of the qualified wages it pays to employees in the third and fourth quarters of 2021 as well.
This powerful tax credit applies to different years with different thresholds.
For 2020, if the employer had full or partial shutdown due to a government order (federal, state, or local government) or a 50% or more reduction in gross receipts, they could get up to $5k per employee in tax credits for wages paid between March 12, 2020 and before January 1, 2021. The credit can include certain health insurance payments also.
For 2021, the ERTC eligibility criteria of full or partial government ordered shutdown remains the same, but the reduction in gross receipts test has a lower threshold. If the employer is eligible for the credit based on gross receipts reduction criteria, then for the 2021 ERTC, eligible gross receipts only need to have gone down by 20%.
The tax credit is equal to 70% of the qualified wages a business pays its employees during 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERTC amount available is $7,000 per employee per calendar quarter, for a potential total credit of $28,000 per employee in 2021!
The credit applies to businesses with up to 500 employees. Note that this is a refundable payroll tax credit offsetting the employer’s portion of payroll taxes; if the credit exceeds payroll taxes, employers can receive a refund. The cash for the tax credit can be applied for by reducing employment tax deposits the employer would otherwise be required to make OR by filing form 7200. If the ERTC is being applied for 2020 eligible wages, the cash can be obtained by filing amended form 941 employer’s quarterly tax returns as well.
- Manufacturing – Low & High Tech
- Software Developers
- Food Processors
- Apparel / Textiles
- Winery / Brewery / Distillery
- Oil & Gas
- Medical Devices
- Real Estates Agencies
Too good to be true?
Over the past 35 years the government has enacted over 700 Congressionally mandated tax incentives & credits designed to help small businesses
What’s the process
According to 2016 Census Bureau data, there are approximately 5.6 million employer firms in the USA. Add in non-employer firms and that number increases to 24.8 million
How do I know
Studies show only 5-10% of eligible companies take advantage of the incentives they are entitled to. Main reason – they simply DO NOT know about them
Why are these Offered?
- Tax incentives & credits were created as an economic stimulus
- To create jobs & keep them on American soil
- To encourage innovation, discovery, & technological advancement
- To promote entrepreneurship
Meet Bruce H. Bradash
CEO / PRESIDENT OF STAR ENTERPRISES GROUP, INC.
Bruce Bradash has been an independent Insurance Broker since 2000. He is a native of Austin MN and graduated from Pacelli High School. For the past 33 years he has resided in the country just north of Stillwater MN. Bruce’s focus and passion is working with self-employed and small business to find affordable and quality insurance products to benefit the owners and employees, promoting quality retention.
Bruce is an expert in educating employers and employees regarding all the insurance products he offers. He has a history of training other agents throughout the Midwest. He also has a passion of supporting our brave military men and women through Oath Inc. oathinc.org