Determining ERTC eligibility can be tricky for many employers. As you probably know, you may be able to claim this tax benefit on qualifying wages if government mandates interfered with your business operations during the COVID-19 pandemic or if you experienced a significant decline in your gross receipts.
However, what if government restrictions influenced your supply chain but not your business operations directly? Would you still count as an eligible employer for claiming the ERTC?
Government Orders and Supply Chain Issues
Picture this scenario: You run an auto repair and maintenance shop. You depend on suppliers for certain parts and materials. During the COVID-19 pandemic, your business experienced no direct restrictions thanks to its status as an essential service.
However, your suppliers had to halt their operations because government mandates led to port closures. You couldn’t find another supplier for the automotive parts you needed, which hampered your ability to provide your usual services. However, you still retained your employees and kept issuing paychecks.
Under these circumstances, you would probably be an eligible employer to claim the ERTC because government orders disrupted your operations by interfering with your supply chain.
Important Tips for Claiming the ERTC
While you may qualify for the ERTC if government mandates impacted your supply chain, you must double-check eligibility criteria and wage calculations. The following tips can make life easier for business owners with complex supply chains.
1. Check Eligibility for the ERTC
As you prepare to file, assess your ERTC eligibility. You can do this in two ways:
- Government order test: Did your business experience a specific and documentable supply chain disruption because of government orders during the pandemic?
- Gross receipts test: Did your business experience a significant decline in gross receipts? “Significant” means at least 50% for 2020 and at least 20% for eligible quarters in 2021, compared to the same quarters in 2019.
2. Document Your Supply Chain Issues
To prove your ERTC eligibility, you should provide solid evidence of your supply chain disruptions.
Specifically, your documentation should include:
- The name and location of the affected supplier
- Records of the government order influencing that supplier’s operations
- How long the supply chain delays lasted
- A detailed and reasonable explanation of how this supply chain disruption impacted your business
- Proof that you couldn’t have sourced the needed parts or materials through a different supplier
3. Beware of ERTC Scams
Many disreputable firms peddle their services as “ERTC consultants” and offer business owners “help” with ERTC claim processing, usually for a hefty fee. Such claims often fail to meet eligibility criteria and can land the business owner in serious trouble, like an IRS audit or even a criminal investigation.
Check credentials and beware of anyone who employs high-pressure salesman tactics to convince you to hire their ERTC claim services.
4. Consult a Reputable Tax Professional
Even if you check IRS guidance materials, it’s easy to make mistakes when claiming the ERTC. The IRS scrutinizes every application because of a high volume of fraudulent or ineligible claims. The last thing you want is to encounter a denial or trigger an IRS audit.
Working with an experienced tax professional can confirm that you are indeed eligible for the ERTC benefit and that your claim satisfies IRS criteria.
Contact Dayes Law Firm Before Claiming the ERTC
Do you have questions about ERTC eligibility? Contact us at Dayes Law Firm before claiming this tax benefit. Our experienced tax attorneys can help you determine eligibility, calculate qualifying wages, and ensure your documentation follows all IRS guidelines.Give us a call at (800) 503-2000 or contact us by filling out our online form to schedule your free consultation.