Like many people, you’ve probably been paying attention to the latest updates about the Employee Retention Credit (ERC) since 2020. Unfortunately, between the numerous updates to the ERC and the clever lies of ERC fraudsters, there is a large amount of misinformation surrounding the ERC tax credit that causes many people to overlook their potential eligibility.
For example, a common ERC misnomer is that, because the Infrastructure Investment and Jobs Act terminated the ERC on September 30 of 2021 for all except Recovery Startup Businesses, it is no longer possible to get the ERC. But, if you meet the eligibility requirements, you can retroactively claim the ERC for your business for 2020, 2021, or both.
Before you claim the Employee Retention Credit, you must pass either the gross revenue test or the suspended operations test. Under the gross revenue test, you can be eligible for the ERC if your revenue decreased by at least 50% for any 2020 quarter or 20% for any 2021 quarter, when compared to the corresponding quarter in 2019.
If you don’t qualify for the ERC under the gross revenue test, you can look at the suspended operations test. To qualify this way, you must have fully or partially closed your business because of a government order. The suspended operations test includes a lot of gray areas so here are some key points to consider:
To learn more about the suspended operations test for ERC eligibility, you can read My business was suspended. Do I qualify for the ERC?
Once you’ve determined that you’re eligible for the ERC tax credit, either through the gross revenue test or suspended operations test, you can calculate your qualified wages. Qualified wages include wages paid during ERC-eligible quarters in 2020 and 2021. Your ERC amount depends on your amount of qualified wages and company size, as shown below:
Now that you know how much you can save with the ERC tax credit, it’s time to claim it. You can claim the Employee Retention Credit by filing an adjusted quarterly payroll tax return (Form 941X) for each qualifying quarter. You’ll need to decrease your deductible wages on your income tax return by your ERC credit amount. It’s also important to document your ERC eligibility since the IRS plans to investigate ERC claims for fraud in the coming years.
If you’ve overlooked the ERC tax credit until now, I’d strongly recommend exploring your eligibility. I’d recommend learning the signs of an ERC fraudster and asking for ERC help from a trustworthy professional with a proven track record and sterling reputation. At MBS Accountancy, here are some recent amounts we’ve claimed for our ERC clients:
If you’re interested in the Employee Retention Credit, check out our Employee Retention Credit Services! It’s an amazing tax opportunity that you deserve to understand and, if eligible, maximize for your business.
Note: This article first appeared in The Business Journal.