ERTC Strategies for Remote or Virtual Workforces

August 16, 2023
Dayes Law Firm

Since COVID-19, the United States has witnessed an increase in virtual workforces. Some people left their offices years ago and found they could do their jobs easily from home. Others adopted a hybrid schedule to accommodate both in-person and remote work.

This raises the question: How does virtual work impact coronavirus aid relief? The Employee Retention Credit (ERC) is a credit businesses may claim on their employment tax return to remedy the revenue loss they faced during COVID-19. A tax attorney can assist with filing claims for the ERC for companies with virtual workforces. Here is what you need to know about qualifying if you have a remote workforce.

Can Virtual Workforces File an ERC Claim If Already Given a PPP Loan?

When the government introduced the ERC in 2020 through the CARES Act, it disqualified any companies that already collected PPP loans. PPP loans, or Paycheck Protection Program loans, were the first way the government offered relief and economic security to businesses during the pandemic. 

PPP loans are short-term loans that the government forgives if businesses prove they use all loan proceeds for payroll and other approved expenses. Because so many businesses collected PPP loans, the government prevented those businesses from filing ERC claims initially, to avoid “double dipping.”

In 2021, this changed with the introduction of the Consolidated Appropriations Act. All qualifying employers could now qualify for PPP loans and ERC benefits.

If you’re an employer of a virtual workforce presently or during the pandemic, the IRS won’t deny your ERC claim solely due to a previously accepted PPP loan. However, your ERC claim may still face rejection on other grounds. 

ERC Requirements for Virtual Workforces

To file a claim for ERC for companies with virtual workforces, you must have experienced a halt in regular operations or a significant loss of revenue between certain time periods in 2020 and 2021.

Business disruptions between March 13, 2020, and December 31, 2020:

  • You experienced a full or partial suspension of regular operations due to a government-ordered shutdown
  • You saw a 50% decrease in revenue compared to the same quarter in 2019
  • Your employees had qualifying wages

Business disruptions between January 1, 2021, and September 30, 2021:

  • You experienced a full or partial suspension of regular operations due to a government-ordered shutdown
  • You saw a 20% decrease in revenue per quarter compared to the same quarter in 2019
  • Your employees had qualifying wages

While it should be easy enough to prove revenue loss, it’s trickier to prove a shutdown of regular operations with your virtual workforce.

Many businesses with in-person staffing saw significant losses when they switched to virtual work due to the pandemic. However, if your business was already virtual or could transition to a virtual setting with little to no trouble, the government will not consider your operations suspended. Even so, you may still qualify for ERC if you can prove that your business still faced losses due to COVID-19.

It’s possible that even if nothing changed on your end, there was a drop in demand on the customers’ end due to the pandemic. If this decreased your gross revenue by 50% in 2020 or 20% per quarter in 2021, you can still qualify for the ERC.

Have More Questions? Contact an Experienced Tax Attorney

If you still have questions about the ERC for companies with virtual workforces, a tax attorney can help you determine your eligibility for ERC and other tax credits.

At Dayes Law Firm, we’ve worked for decades to provide tax support. We have helped hundreds of businesses apply for ERC, and yours could be next. Call (800) 503-2000 for a free consultation.