EMPLOYEE RETENTION
TAX CREDIT (ERC) - Pending Legislation aims to end this program

26 U.S. Code § 3134 - Employee retention credit due to COVID–19

Expert American CPAs: Navigating Complex Pandemic Laws

CASH BACK UP TO $26K PER EMPLOYEE

ERC Credits are Cash Back!

Did you own a business in 2020 or 2021?

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Did you have W-2 employees?

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Did you retain staff?

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With a 15-minute conversation, our CPAs will confidently provide an estimate.

START THE APPLICATION PROCESS NOW

NOTICE - ERC DEADLINE:
Businesses cannot amend returns past the 3-year statute of limitations for these credits.

NOTICE - ERC MILLS:

The IRS is advising taxpayers of a rise in “ERC mills” and questionable ERC services. As such, it is important for businesses to work with reputable and experienced tax professionals who can provide guidance on the proper use of the tax credit and ensure compliance with applicable regulations.

Overview of Employee Retention Credit

The Employee Retention Credit (ERC) was implemented by the US government in response to the COVID-19 pandemic. The ERC was designed to provide a tax credit to eligible employers who had to reduce their business operations or suspend them altogether due to COVID-19-related reasons.

Why so much confusion?

The ERC program was scheduled to end on December 31, 2020. In December of 2020, Congress passed a bill that extended the program to June 30, 2021, and made some changes to the eligibility requirements.

Despite the extension of the program, the IRS issued guidance in early 2021 stating that employers who received a Paycheck Protection Program (PPP) loan could not also claim the ERC. This guidance caused confusion and frustration among many employers who had already received PPP loans and were hoping to claim the ERC as well.

Later in 2021, the IRS issued additional guidance stating that employers who received PPP loans before December 27, 2020, could retroactively claim the ERC for wages paid after March 12, 2020, as long as they met the eligibility requirements.

The ERC shutdown orders referred to the end of the ERC program on June 30, 2021, and the confusion caused by the IRS guidance regarding the interaction between the ERC and PPP loans. Despite this confusion, many eligible employers can claim the ERC for wages paid during the eligible period. Retroactive claims are allowed for businesses with qualified quarters and some employers who received PPP loans before December 27, 2020.

Industries

  • This is a very expansive and inclusive credit. Some of the most impacted industries have been but are not limited to:

    Cosmetology

    Education

    Gyms

    Hospitality

    Small retail

    Non-emergency medical

    (chiropractor, dentist, specialist)

Shut Down Orders

  • The Local, State and Federal authorities all had various shutdown orders. We will want to look at all levels of governmental shutdown orders to qualify as many quarters as you are eligible for. We have lawyers who help navigate this portion of the credit.

Documentation Needed

  • Gross Receipts (Revenue)

    Quarterly Employee Count

    Quarterly Payroll (Form 941)

    PPP information if Received

Frequently Asked Questions (FAQS)

  • To qualify for the ERC, an employer must have experienced a significant decline in gross receipts or a full or partial suspension of business operations due to government orders related to COVID-19, and must have paid wages to employees during the eligible period.

  • The ERC (Employee Retention Credit) is a tax credit program designed to provide financial relief to eligible employers who had to reduce their business operations or suspend them altogether due to COVID-19 related reasons.

  • No, the ERC is a tax credit that does not need to be paid back as long as the employer meets the eligibility requirements and follows the guidelines for claiming the credit.

  • Employers can claim the ERC as a refundable tax credit on their employment tax returns, such as Form 941. If the credit exceeds the employer's tax liability, the excess credit can be refunded to the employer. Alternatively, employers can request an advance payment of the ERC by filing Form 7200 with the IRS. The advance payment will be applied against the employer's employment tax liability and any excess will be refunded to the employer.

  • Yes, eligible employers can claim both the ERC (Employee Retention Credit) and the PPP (Paycheck Protection Program) loan, but there are some restrictions and limitations to consider.

    For wages paid during the covered period of a PPP loan, an employer cannot use the same wages to both receive forgiveness of the PPP loan and claim the ERC. However, if an employer did claim the ERC for qualified wages not used to seek PPP loan forgiveness, they may still be able to claim the credit for those wages.

    Additionally, if an employer received a PPP loan in 2020 but repaid the loan in full by May 18, 2020, they may be eligible to claim the ERC for qualified wages paid during the period in which the PPP loan was outstanding.

    It is important to note that the rules and requirements for claiming the ERC and PPP loan forgiveness can be complex, so it is recommended to consult with a BAY tax professional for guidance on how to claim both programs based on your specific situation.

  • The Employee Retention Credit (ERC) is a refundable tax credit, which means eligible employers can claim the credit on their employment tax returns, such as Form 941x, and receive a refund from the IRS if the credit exceeds their employment tax liability. The timing for receiving the refund can vary depending on factors such as when the return is filed when the credit is claimed, and the IRS processing times. Currently, we are seeing most checks come around the 3-month timeline.