Employee Retention Credit Eligibility: Who Can Apply for the ERC?

April 18, 2023
Dayes Law Firm

Many employers may already know about the Employee Retention Tax Credit (ERC or ERC), but may not know whether or not they qualify to apply for the program. Employee Retention Credit eligibility can seem tricky at first glance, but there are actually some pretty clear guidelines about whether or not a business qualifies. 

Employee Retention Credit Eligibility

ERC eligibility differs depending on whether you’re talking about the calendar year 2020 versus 2021. Key determining factors that could allow employers to be eligible to claim the ERC for calendar year 2020 include whether they operated a business at that time and experienced either a full or partial suspension of the operation of their business during any quarter of that year as a result of a governmental order limiting certain operations. 

Additionally, if the business experienced a significant decline in gross receipts by more than 50 percent when compared to the same quarter from the year 2019, it could also qualify.

When it comes to 2021, employers can potentially retroactively claim the ERC if they operated a business that year and experienced either a full or partial suspension of the operation of their business during a calendar quarter as a result of government orders due to COVID-19. 

Or, if the business experienced a decline in gross receipts in the first, second, or third calendar quarter in 2021 and the gross receipts of that calendar quarter are less than 80 percent of the gross receipts in the same 2019 calendar quarter, the business could qualify to apply for the Employee Retention Credit.

Recovery Startup Business ERC Eligibility

There are also some qualifications for “Recovery Startup Businesses,” as defined by the IRS. For the third and fourth calendar quarters of 2021, the ERC may be available to employers who “otherwise do not meet eligibility criteria (full or partial suspension or decline in gross receipts).”

These qualifications are:

  • The business began carrying on trade or business after February 15, 2020
  • The business has annual gross receipts that don’t exceed $1 million
  • The business is not eligible for the ERC under the other two categories

How Dayes Law Firm Can Help

There are additional factors in play when it comes to Employee Retention Credit eligibility, including what counts as qualified wages, determining the maximum credits that can be claimed, eligibility under the governmental order test, and other details. 

Those details are crucial to obtaining the best refund you can secure for your business, and that’s how Dayes Law Firm can help. We recommend getting ERC experts like those at Dayes Law Firm to help you apply for the ERC program. 

We can determine if your business is eligible for the ERC tax credit for you, and file the appropriate amended quarterly payroll tax returns on your behalf to claim your funds so you can focus on your business!

The Dayes Law Firm team of experienced tax attorneys is ready to help you establish Employee Retention Credit eligibility for your business and claim the tax incentives your business is entitled to. Contact us today for a no-obligation, free consultation to learn more.