Do You Qualify for an Employee Retention Credit (ERC)?

By Christopher J. Kane, Hunter J. Schoen, Erica P. Sensenbrenner, Robert P. Bethea Jr., G. Robert Parrott II, Adams and Reese. 

New amendments to the CARE act mean that more businesses than before are eligible for an ERC — even if they received a PPP loan. 

An Employee Retention Credit (ERC) is a part of the CARES Act, created during the pandemic as a way to help businesses keep their employees on payroll throughout the lockdowns. ERC’s give employers who are eligible payroll tax credits for wages and health insurance paid to employees from 2020 and 2021. This meant that companies could receive up to $5,000 per employee for 2020 and up to $7,000 per employee Q1- Q3 in 2021. 

Similarly, the Paycheck Protection Program (PPP) was made available to assist businesses keep their workforce employed during the crisis. Originally, employers were only allowed to claim one or the other – either ERC or PPP. New amendments to the CARES Act mean that eligible employers may now claim an ERC, even if they received a PPP loan. Read on to learn more about the nuances of these changes from Adams and Reese and see if you are eligible. 

Are you eligible for the ERC? 

If you can answer yes to any of the following questions, then it is worth evaluating your company’s eligibility for the ERC. 

1 - Did your business suffer a significant decline in gross receipts for a calendar quarter in 2020 or 2021 compared to the same quarter in 2019? 

2 - Did a COVID-19 order require your business to suspend or discontinue a portion of its services for a period of time? 

3 - Did a COVID-19 order require your business to modify its workplace and/or operations? 

You answered “yes,” so now what? 

Although an ERC relates to payroll taxes paid in 2020 and 2021, employers have up to three years to amend Form 941x to initiate the ERC refund process. Even if you did not previously qualify, it is advisable to re-evaluate your eligibility now – especially for the 2021 ERC period. 

The ERC process is not simple, and there are nuances and technical aspects that require specific expertise. The following is a dedicated team of ERC experts that can offer guidance and help assess eligibility to ensure you are on the right track. 

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The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Original article source: Adams and Reese