ERC - Who's Eligible?

The employee retention tax credit provides a refundable tax credit for wages paid to employees after March 12, 2020, and before December 31, 2021

Business Eligibility 

A business is eligible if they suffered a "significant decline" in gross receipts or if the business was completely or partially shutdown

What is considered a Significant Decline?

• For 2020 – 50% reduction in gross receipts
  
  • You will need to start with a 50% reduction in one quarter continuing the next quarter with a 20% reduction
  • You will automatically get the next quarter even though you don't meet a reduction in gross receipts as the eligibility extends one quarter past a qualifying quarter
• For 2021 – 20% reduction in gross receipts 
  • If you suffered a 20% reduction in the 4th quarter of 2020 you are automatically eligible to receive the ERC in the 1st quarter of 2021
  • Same applies to any quarter in 2021; i.e., if you qualify for Q2 2021, you automatically qualify for Q3 as well

• • Employees paid while the business was completely shut down due to official government orders for a specific period
  • Partially shut down due to government order and this affects more than 10% of your business operation or gross receipts compared to 2019.
    • For example, you own a retail store that's only open for curbside pickup or your storefront is open but customers had to maintain social distancing which only allowed a minimum amount of people in the store, and this affected more than 10% of your gross receipts

Other Rules 

• • The owner’s wages are not eligible for the ERTC if they have any living family members (previously many believed that the owners are eligible)
  • Spouse and other relatives are not eligible either to receive the ERC 

• • On the quarterly 941s
  • Requesting an advance payment with the IRS
  • If you are requesting for a previous quarter, you can amend the Form 941 filing. The Credit can be claimed using one of the following options;
• Credit Limits
  • ERTC1 for 2020 – credit 50% of wages + cost of health benefits
    • Capped at $5,000 per employee
  • ERTC2 for 2021 –credit 70% of $10,000 of wages + cost of health benefits
    • Capped at $7,000 for each quarter for a total of $28,000
      

ERC and PPP Overlap 

• You can now be eligible for both PPP and the ERC. This even applies retroactively to 2020
• However, it is important to know that you can’t claim the same wage dollars for both ERC and PPP forgiveness. You can't be double-dipping
• Questions: For $100 in wages that yields a $50 ERC How much of the above $100 in wages can be covered with PPP? $50 or $0? Answer; the consensus that we saw is that Zero. The law states that you can't use the same wage dollars to *CLAIM* the ERC and PPP forgiveness. You need $100 of ERC eligible wages to claim $50 in ERC.

Disclaimer:

• This post is meant to be used as a resource and should only be used with the help of a professional. If you find anything that you believe needs clarification or correction, please comment below to notify us and we will address it. 
• The information above pertains to companies with less than 100 employees