When the COVID-19 pandemic was at its height, the government introduced the Employee Retention Tax Credit to help struggling businesses. However, the pandemic is far from the only disaster businesses have to cope with. 

Fortunately, the government recognized this. Now, businesses can claim the ERTC for qualified disasters. Since this tax credit is still new, not all business owners understand how to claim it, but how are the ERTC and disasters related?

The federal government expanded the ERTC to help businesses who experienced shutdowns in relation to qualified disasters.

What Is the ERTC?

The Employee Retention Tax Credit began as the government rewarding businesses for keeping employees on their payroll. It introduced this as part of the Coronavirus Aid, Relief, and Economic Security Act. Eligible employers could claim the ERTC for employee wages they paid during the COVID-19 pandemic.

In 2021, the Consolidated Appropriations Act made the ERTC accessible to more businesses by adjusting the eligibility requirements. It also extended the ERTC through 2021, though the Infrastructure Investment and Jobs Act later limited the ERTC to the first three quarters of 2021, with the exception of recovery startup businesses.

What Is a Qualified Disaster?

In addition to expanding the qualifications for the ERTC with the Consolidated Appropriations Act, the government introduced ERTC opportunities for businesses that suffered from natural disasters. This came with the provision titled Disaster Tax Relief. 

Similarly to the ERTC for COVID-19 relief, the ERTC for qualified disasters compensates businesses for keeping employees on their payroll amid disaster. You can claim this credit if your business became inoperable due to a qualified disaster. 

A qualified disaster zone includes:

  • Tornadoes
  • Hurricanes
  • Wildfires
  • Volcanic eruptions
  • Earthquakes
  • Typhoons
  • Tropical storms

A federal government agency must declare the area a major disaster before you can claim the ERTC. You may claim 40% of qualified wages up to $6,000 per employee. 

Qualified wages include any wages paid or incurred at the time of the disaster or while the business was inoperable. The incident period ends on the date the business returns to normal operations or 150 days after the disaster, whichever comes first. 

Use Form 5884-A To Claim the ERTC for Qualified Disaster Relief 

The next thing to know about ERTC and disasters is the form you need: Form 5884-A. You have two credits available to claim employee retention credit for employers affected by qualified disasters: 

  • 2018 through 2019 qualified disasters 
  • 2020 qualified disasters

First, fill out your identifying information, including your business name and identifying number. Then, enter the total qualified wages you paid for that tax year on lines 1a and/or 1b. Note that you cannot enter more than $6,000 per employee. If necessary, add 1a and 1b and fill out that value on line 1c. 

Multiply that value by 40%, and fill in that value on line two. Then, enter your total employee retention credits on line three. Combine the values on lines two and three to fill out line four. 

From here, partnerships and S-corporations can stop and report the amount on Schedule K, while others report the amount on Form 3800. If you’re filing for an estate or trust, skip this step and go to line five.

Finally, submit the form to the Internal Revenue Service.

Claim the ERTC for Qualified Disaster Relief With Skilled Tax Attorneys

Now that you know all about the ERTC and disasters, you can move forward with your claim. Claiming the ERTC can be complex. As a business owner or employer recovering from a disaster, you may not have time to work through this process.

With help from the ERTC team at Dayes Law Firm, you can claim the ERTC with ease. Call 866-567-4510 today for a free consultation