Can a Business Claim the ERC If Revenue Went Up During Covid?

September 13, 2023
Dayes Law Firm

One of the eligibility requirements to claim the Employee Retention Credit (ERC), otherwise known as the Employee Retention Tax Credit (ERTC), is a decline in gross receipts compared to the same quarter in 2019. But what if your company saw an increase in revenue? Is there any other way to qualify for the ERTC? The ERTC credit can help employers get a refund from the IRS for qualified wages paid during the height of the pandemic.

What Is the ERTC?

Eligible employers can claim the ERC for a refund on payroll taxes for qualified wages paid during the pandemic in 2020 and the first three quarters of 2021. However, employers claiming the ERC/ERTC should know the IRS guidelines against double-dipping. For example, you cannot claim the ERC for wages paid by Paycheck Protection Program (PPP) loan forgiveness.

If you qualify to claim the full ERTC amount, you could receive up to $26,000 per eligible employee for whom you paid qualified wages between March 13, 2020, and September 30, 2021. Employers might get a tax credit for up to $5,000 per employee for 2020 and up to $7,000 per employee per quarter for the first three quarters of 2021.

Small and medium-sized businesses (SMBs) may claim the credit for qualifying wages and health plan contributions for up to 100 employees in 2020 and up to 500 employees in 2021. Large businesses may only claim wages paid for employees who did not provide services because of decreased revenue or government-mandated shutdowns.

Recovery startup businesses are businesses that opened on or after February 15, 2020, and have less than $1 million in revenue and at least one employee (W-2 or similar). Recovery startup businesses may qualify for an ERTC of up to $50,000 for Q3 and Q4 of 2021, for a total of $100,000.

Eligibility Requirements for Claiming the ERC

Companies eligible to claim the ERTC must meet certain criteria. For your business to be eligible to claim the ERTC, it must have:

  • Experienced a full or partial shutdown or restrictions as mandated by federal, state, or local government that affected travel, operations, or occupancy, OR
  • Experienced a decline in gross receipts in 2020 of 50% or more compared to the same quarter in 2019, OR
  • Experienced a decline in gross receipts in the first three quarters of 2021 of 20% or more compared to the same quarter in 2019, OR
  • Qualified as a recovery startup business

If you don’t meet the criteria for the decline in gross receipts, you may qualify to claim for the time during which your business was affected directly or indirectly by mandated shutdowns or commerce restrictions. You may qualify if the government shut your business or industry down for a certain period or if your suppliers were affected by government mandates that affected your business operations.

You may also qualify as a recovery startup business if you meet the criteria and may need to recalculate your receipts for Q3 and Q4 of 2021.

Contact Dayes Law Firm for Information About the ERTC

For more information about whether your company qualifies for claiming the ERTC, trust our experienced business tax attorneys at Dayes Law Firm. Our knowledgeable tax lawyers can help you determine whether your company is eligible to claim specific quarters based on a decline in gross receipts or whether you can claim the quarters when your business was mandated to close or reduce services.

Call (866) 567-4510 today or contact us online to schedule a free consultation with one of our skilled ERC attorneys to learn more about whether your business qualifies for the ERTC.