How the ERTC Can Help Your Business Maximize Results

January 5, 2024
Dayes Law Firm

Did you know that the government offers up to $26,000 per employee that your business paid during the COVID-19 pandemic? This may sound too good to be true, but the ERTC is real, and it has helped thousands of struggling business owners stay afloat during times of financial hardship.

What are the advantages of this refundable tax credit, and how can your business benefit? Learn about a few ERTC incentives that will help your business grow.

Business Benefits of the ERTC Program

Perhaps the biggest benefit of the ERTC is that the IRS doesn’t place any restrictions on what you can do with the money. Additionally, this is a refundable payroll tax credit, not a loan, so you don’t have to pay it back.

Benefits of the ERTC program include:

  • Financial security for your business. It can be a relief to have extra cash on hand if your business runs into an emergency.
  • The opportunity for growth. Have you ever wanted to launch a new product or open up a new location? With cash from the ERTC, you can do exactly that.
  • Employee satisfaction. Even loyal employees won’t stick around for long if you don’t keep them happy. You can use the ERTC to give bonuses to employees or build out your benefits program. Offering incentives like discounted childcare and tuition reimbursement is a great way to retain and attract employees.

Advantages of the ERTC Tax Credit for Startup Businesses

The IRS understands how much new businesses struggled during the pandemic, and in turn, has made it easier for startup recovery businesses to qualify for ERTC advantages. As a startup recovery business, you may qualify for the credit even if you don’t meet the gross receipts or government shutdown test.

Claiming this credit can help you keep your doors open when you’d otherwise have to go out of business. IRS criteria for recovery startup businesses include:

  • Your annual gross receipts are less than $1 million for the 2020 and 2021 tax years.
  • You have at least one W-2 employee, not counting family members or owner-operators.
  • Your business launched on or after February 15, 2020.
  • You aren’t otherwise an ERTC-eligible employer due to a government shutdown or significant decline in gross receipts.

Note that this last point doesn’t apply for the fourth quarter of 2021.

How Can You Claim the Credit?

To claim the ERTC, you’ll first need to meet one of two requirements (unless you’re a recovery startup business owner, as outlined above). These requirements include:

  • You had a major drop in gross receipts. For 2020, you must have had at least a 50% decline compared to the same calendar quarter of the prior year. For 2021, you need a decline of at least 20%.
  • You had to close your business, partially or fully, because of a government order limiting commerce, group meetings, or travel.

Many business owners are confused about the “government shutdown” requirement. You needn’t necessarily have closed your business completely to qualify. Examples of partial shutdowns that would qualify include:

  • You operated a doctor’s office and the pandemic forced you to close your waiting room.
  • You manage a daycare center and the pandemic caused limits on how many children you could accept.
  • Your restaurant was limited to outdoor dining only.

If you qualify, claim the credit using Form 941-X: Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

Enjoy Serious Tax Savings With the ERTC

If you’d like to benefit from these ERTC advantages, give Dayes Law Firm a call at (800) 503-2000 to request more information. Our Employee Retention Tax Credit team can tell you whether you qualify and help you claim this valuable credit.