The Complete Checklist for Claiming the ERC

August 22, 2023
Dayes Law Firm

If you’re an employer who kept their business running through the COVID-19 crisis of 2020 and 2021, you may be able to claim the Employee Retention Credit (ERC)/Employee Retention Tax Credit (ERTC), part of the American Rescue Plan. But what if you’re unsure whether your company meets the eligibility criteria for ERC? The following ERTC checklist will help determine whether you qualify for the credit.

1. Did Your Business Fully or Partially Close During the COVID-19 Pandemic?

If your business stopped or partially suspended its operations in response to local or state government COVID-19 restrictions yet still kept employees on its payroll, you may qualify for the employee retention credit. The suspension must have significantly affected your business operations, like limited occupancy, restriction of on-site transactions, transition to curbside pickup only, etc. 

2. Did You Suffer a Significant Decline in Gross Receipts?

The second and perhaps most significant question on this ERTC checklist is, “Did your quarterly gross receipts decline by over 50% in 2020 and over 20% in 2021 compared to 2019?”

If the answer is “yes,” you likely qualify for the ERC. You could claim up to $5,000 for an eligible employee for 2020 and $7,000 per eligible employee per quarter for 2021. 

3. Is Your Company a Recovery Startup Business?

Did you open a new company after February 15, 2020? Do your average annual gross receipts for the three former tax years fall below $1 million? If so, your company may count as a recovery startup business and could claim an ERTC for the amount of up to $50,000 for both Q3 and Q4 of 2021 (a total of $100,000).

Interestingly, if you invested in rental property after February 15, 2020, this could also count as the beginning of a recovery startup business. 

4. Did You Already Collect ERC Refunds?

Even if your company has already received ERC refunds, you’ll want to check whether you handled this process correctly and claimed the full ERC amount your business is eligible for. Calculating employee retention credit can be tricky, and it’s possible your tax return forms for 2020 and 2021 didn’t take full advantage of this tax benefit. A skilled tax professional can help you establish whether your business may be able to claim additional credit by filing amended returns. 

5. Did You Apply for PPP Loan Forgiveness? 

Applying for PPP loan forgiveness doesn’t disqualify you from claiming the ERC, but if the forgiven loan amount goes toward paying employee wages, these wages are ineligible for employee retention credits. 

Up to 40% of PPP money can cover non-payroll expenses like utilities, rent, equipment, and more. Of the 60% that must apply to payroll, you should use as much as possible for payroll expenses that wouldn’t count toward the ERC, like owner payroll, retirement benefits, payroll taxes, and more.

You should consult an experienced tax law firm to ensure you comply with IRS requirements when claiming the ERC and PPP loan forgiveness. Working with the right tax professional will help you claim all available credits and reduce the odds of an IRS audit. 

Claim Your ERTC Now With Professional Help From Dayes Law Firm

Do you believe your business may qualify for the Employee Retention Credit based on our ERTC checklist? Contact Dayes Law Firm today. Our legal team will let you know whether the ERC applies to your business and guide you through the steps of claiming this valuable tax benefit before time runs out. 

Call (866) 875-1005 today for a free consultation with an experienced tax lawyer to learn all you need to know.