Can the ERTC Help Agribusiness Weather Economic Challenges?

January 22, 2024
Dayes Law Firm

Many agricultural businesses took a hit during the COVID-19 pandemic because of travel restrictions, disrupted supply chains, and decreased demand from big clients like restaurants and hotels.

If you still kept workers on payroll during those tough times, the ERTC could help you regain your financial footing as the owner of an agricultural business. Do you qualify for this tax credit, and how should you use it?

Is Your Agribusiness Eligible for the ERTC?

The Employee Retention Credit (ERC), a.k.a. the Employee Retention Tax Credit (ERTC), is a refundable credit providing a major cash boost for many businesses including agribusinesses. For 2021, the tax credit may amount to 70% of qualified wages (up to $10,000 per employee per quarter), compared to 50% of qualified wages (up to $10,000 per employee per year) in 2020. 

You could claim this credit if your agricultural business employed fewer than 100 full-time workers in 2020 and fewer than 500 full-time workers in 2021, and if at least one of the following is true:

  • You fully or partially suspended your operations because of government restrictions related to the pandemic
  • Compared to the same quarter in 2019, your gross receipts were at least 50% lower in 2020, and at least 20% in 2021

What to Review Before You Claim This Tax Credit

You may say, “Great news! It looks like I can claim the ERTC for my agricultural business.” However, even if you answer the basic eligibility requirements, you should consult a skilled tax professional before claiming this credit. A mistake could prompt the IRS to reject your claim or audit your business. 

A reputable tax lawyer or consultant can help you calculate qualifying employee wages. For example, if you received a Paycheck Protection Program loan and spent these funds to pay employees, you can’t claim the ERTC for the same payroll costs. Some types of wages, like owner wages, can’t count toward the ERTC. 

How Should You Use ERTC Funds?

Assuming the IRS approves your claim and you collect a sizable amount of cash through the ERTC, what should you do with the money? This would depend on your business strategy, but let’s list a few suggestions. 

Cover Debt and Save Money

Many small to mid-sized agricultural businesses struggle with debt. You could use the ERTC cash boost to pay off some or all of your loans and open a clean financial slate. Any leftover money could start an emergency fund you may use in a future economic crisis. 

Buy New Equipment

Innovative agricultural equipment could give your business a competitive edge in a tough market. Your tax refund might help you purchase autonomous tractors, advanced digital systems, setups for vertical aeroponics, and other equipment that applies to your branch of agriculture. You could also fund training programs for your employees. 

Invest in Your Team

If you’re dealing with high staff turnover, constantly hiring and onboarding new workers can become a major problem. You can improve employee loyalty by using some of your ERTC funds to reward your team. This can take the form of a cash bonus, an expanded benefits program, or other employee perks that make your company a more attractive one to work for.

Not Sure Whether Your Agricultural Business Can Claim the ERTC? Call Dayes Law Firm  

Do you have questions about the ERTC for agricultural businesses? Are you unsure how to calculate wages for this tax credit? Contact us at Dayes Law Firm. Our experienced tax lawyers will check your eligibility and help you understand how much you can claim under the ERTC. Call 800-503-2000 or contact us online for a free consultation.