Can a Business Claim the ERTC for Revenue Declines in Some Quarters but Not Others?
As a business owner, you probably don’t want to think back to the state of your business in 2020 and 2021. If you experienced a revenue decline or an interruption in business operations during that period, however, you can file for the Employee Retention Tax Credit (ERC or ERTC) to reclaim money back.
However, due to the many changes the ERTC went through, not all business owners know if they qualify for the ERTC. Revenue declines are one of the ways businesses can qualify, but the specifics of that test can be confusing. Our team at Dayes Law Firm explains everything you need to know.
What Is the ERTC?
In 2020, Congress introduced the ERTC through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The ERTC is a refundable tax credit that you can use to claim employee wages you paid in 2020 and 2021.
If you operated a business in 2020 and 2021, you may be able to file retroactively for this credit. Eligible employers can collect up to 50% of employee wages for 2020 and up to 70% for 2021. The maximum limit for both tax years is $10,000 per employee per quarter.
The credit benefits small businesses (100 or fewer full-time employees in 2020, 500 or fewer in 2021) the most, but it is helpful for all.
Qualifying for the ERTC
Businesses and tax-exempt organizations can qualify through two methods: a significant decline in gross receipts or a suspension due to a government order.
To qualify under the suspension test, government-mandated shutdowns or guidelines must have significantly impacted your business. For example, if you had to change your business hours due to government restrictions. Some businesses had to move fully online, and that altered their entire business model.
Alternatively, you can qualify under the gross receipts test. This test compares your gross receipts from 2019 with those for 2020 and 2021. To qualify for 2020, you must see a 50% decline in revenue between comparable quarters in 2019. For 2021, you must see a 20% decline in revenue between comparable quarters in 2019.
You Can Claim the ERTC for Revenue Decline Per Quarter
Claiming the ERTC for revenue decline isn’t always straightforward. What happens if your revenue loss isn’t consistent across quarters?
When you claim the ERTC for revenue decline, you do so by quarter. If you experienced a 50% revenue decline for the fourth quarter of 2020 but not the third, you still can claim the ERTC for the fourth quarter.
You can also claim the ERTC for subsequent quarters if they saw at least a 20% decline from the comparable quarter. For example, if your business saw a 50% loss in revenue in the third quarter of 2020 and the fourth quarter only lost 20%, you could still claim the fourth quarter for the ERTC as a subsequent quarter.
However, if the fourth quarter in 2020 only lost 19%, then that quarter is ineligible for the ERTC.
Calculate your losses carefully to ensure you claim all eligible quarters for the ERTC. Revenue declines can be difficult to navigate, but our legal professionals at Dayes Law Firm can help.
Claiming the ERTC for Revenue Decline? Contact Dayes Law Firm
Our team at Dayes Law Firm can help you file for the ERTC. Revenue declines aren’t the only part of the ERTC that feels complex. As a business owner, you have enough on your plate already. Let us guide you through this process.
We’ve already helped hundreds of businesses file for the ERTC. Our team of ERC refund recovery lawyers has assisted in filing over $100 million in ERTC. Contact us at 800-503-2000 for a free consultation.