What Are the Alternatives to the Employee Retention Credit?

December 14, 2023
Dayes Law Firm

The Employee Retention Tax Credit can provide much-needed funds to business owners facing financial troubles during the COVID-19 pandemic. Requirements to qualify are rather strict, though, and not every business qualifies.

Even if you’re ineligible for the ERTC, you may be able to claim other tax credits for employers. Learn more about a few of these ERTC alternatives below.

Work Opportunity Tax Credit

The WOTC is a federal tax incentive for employers who hire veterans and other individuals from historically disadvantaged target groups. The credit amount varies based on an employee’s target group, their wages, and how many hours they worked in their first year.

After an employee has worked 120 hours, you can claim a credit of 25% of the employee’s wages (maximum $750 to $6,000). After they’ve worked 400 hours, you may claim a credit of 40% of their wages (maximum $1,200 to $9,600).

Research and Development Tax Credit

The purpose of the Research and Development (R&D) Tax Credit is to encourage employers to invest in research and new technologies. This credit:

  • Allows you to lower your state and federal tax liability for this year and future years
  • Lets you keep more of your profits
  • Lowers your effective tax rate

In 2004, the IRS changed how businesses could claim the credit. You only qualify if your business engages in hard science, such as data analysis or product testing.

Disabled Access Credit

This is one of several ERTC alternatives that give employers money to make their business more disability friendly. You can use the credit to:

  • Hire interpreters for employees with impaired hearing
  • Remove physical, communication, or transportation barriers
  • Provide methods of communicating information for people with visual impairments

To qualify, you must own a small business that meets one of these requirements:

  • Have 30 or fewer employees
  • Have $1 million or less in gross receipts reported on your tax returns

Architectural Barrier Removal Tax Deduction

This tax deduction provides up to $15,000 per year for businesses to make their buildings, equipment, sidewalks, and parking lots more accessible to people with disabilities. Businesses may claim this deduction and the Disabled Access Credit in the same tax year if they qualify for both.

Special Employer Incentives Program for Veterans

SEI is a program designed to assist veterans having trouble finding work. Through this program, Veterans Affairs matches veterans with suitable employers. Employer perks include:

  • Reimbursement of up to 50% of the veteran’s wages during the program (which typically lasts for six months)
  • Accommodations depending on the veteran’s needs
  • VA-provided tools, uniforms, equipment, and supplies

Do You Qualify for the ERTC?

You may qualify for the ERTC even if you think you’re not eligible. You must meet at least one of the following requirements:

  • You had a significant decline in gross receipts (this means a drop of at least 50% for 2020 and at least 20% for 2021)
  • Your business had to partially or fully close because of a government order

Even if you believe you don’t meet the gross receipts test, you may be able to meet the requirements through the alternative quarter election rule. This rule lets you use Q4 2020 receipts to qualify for Q1 2021.

For 2020, you may claim the credit for wages paid between March 30 and December 31, 2020. For 2021, you can claim the credit for wages paid between December 31, 2020, and September 30, 2021. Recovery startup businesses can claim the credit for the third and fourth calendar quarters of 2021 as well.

To learn more about ERTC alternatives or find out whether you qualify for the ERTC, call Dayes Law Firm at (800) 503-2000.