Employee Retention Tax Credits
Some businesses believe they are not eligible for the Employee Retention Tax Credit, which may be applicable to small to midsize businesses. Think again!
- Over the past 35 years the government has enacted over 700 Congressionally mandated tax incentives & credits designed to help small businesses
- 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
- 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
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 to increase sanitation of your facility
If an employer had a significant decline in revenues or had to fully or partially suspend business operations due to government orders, they qualify for ERC:
Significant decline in revenue is defined as:
For 2020 - a 50% decline in revenues in any quarter compared to the same quarter in 2019
For 2021 – a 20% decline in revenues in any quarter compared to the same quarter in 2019
ERC ends when quarterly revenue in 2020 exceeds 80% for the same quarter in 2019
If an employer does not meet the revenue threshold, they may still qualify if they experienced either a partial or full shut-down of business operations.
- Manufacturing – Low & High Tech
- Software Developers
- Food Processors
- Apparel / Textiles
- Winery / Brewery / Distillery
- Oil & Gas
- Medical Devices
- Real Estates Agencies
- Commercial Contractor – $172,000
- Printing Company – $18,000
- Real Estate Agency – $800,000
- Dentist – $148,000
- Agriculture – $1.2 million
- Plastic Surgeon – $75,000
Employee Retention Credit: The Basics
“The Internal Revenue Service urges employers to take advantage of the newly-extended employee retention credit, designed to make it easier for businesses that, despite challenges posed by COVID-19, choose to keep their employees on the payroll.”
- Refundable Federal Payroll tax credit up to $19,000 per employee!
- May claim the ERC for qualified wages paid starting March 12,2020
- The number of employees a company has does not affect whether a company may claim the credit