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The Employee Retention Credit is a tax credit that was introduced in the Cares Act. The tax credit offers up to a $26,000 per W2 employee refund for employers that continued to operate, despite the challenges that were presented during the pandemic. If you continued to operate during these years, odds are that you qualify for the ERTC. This means, if you had 4 W2 employees that you kept during 20 & 21 you could receive around $100,000 as an ERC tax refund.
Who Qualifies for the Employee Retention Tax Credit
ERTC qualifications are based on a reduction in gross revenue and/or a nominal impact to your business during 2020 and 2021. When this program came out, the guidelines for qualifying were pretty strict, but as time went on, the ERTC qualifications loosened. Because of these changes to the tax code, most businesses believe that they don’t qualify.
So, do I qualify for the ERC? Most likely, even if you didn’t have a reduction in revenue, yes, you still qualify. Even if you received PPP, you can still qualify. We have met businesses that made more money in 2020 and 2021 than they did in 2019, and they received Paycheck Protection Program funding, and they still qualify.
Please understand that the real reason for this credit is to compensate the businesses that continued to operate despite all of the challenges that were imposed on them. If you continued to operate, then you are a prime candidate for the ERC refunds.
Sometimes, when you are trying to understand how you qualify it makes sense to speak with a professional that has experience in acquiring.
How to apply for the Employee Retention Tax Credit
First you will need to evaluate your quarterly revenue from 19, 20 and 21. If you had a 50% reduction from 19 to 20, you qualify for that year. If you had a 20% reduction from 19 to 21, you qualify for that year.
2019 – $100k
2020 – $50k – qualifies
2021 – $80k – qualifies
This math is done quarterly and can be confusing, but the easiest employee retention credit eligibility is through a reduction in revenue.
Nominal Impact ERC Credit
If you don’t have a reduction in revenue, then there is another way to qualify for the Employer Retention Credit. The second way to receive an ERC check is to have a nominal change in regular business. This is a different story for each qualifying business, and we strongly recommend you speaking with a professional that understands the code.
If I received PPP funding, can I still qualify for the ERC?
Yes, but we will need to deduct that amount out of your totals.
If I made more money in 2020 and 2021 than I did in 2019, can I still qualify?
Yes, you could have made more money during 20 and 21, and still qualify for the Employee Retention Credit.
It is very likely that you qualify under the nominal impact standard for the Employee Retention Credit.
How do I apply for Employee Retention Credit?
You will need to determine how you qualify for the program. Then you will amend your 941s with the 941X and send them in to the IRS.