What ERTC Benefits Are Available for Small Law Firms? 

January 31, 2024
Dayes Law Firm

Like most industries, the legal sector was heavily impacted by the pandemic. Due to modified services and closures, as well as restrictions on in-person meetings, many court operations were halted. With courtrooms closed and client meetings turning virtual, law firms faced challenges keeping their doors open for business. 

Fortunately, the Employee Retention Tax Credit (ERTC) has allowed law firms to claim a refundable tax credit of up to $26,000 per employee for qualified wages. Read on to learn more about the benefits available and the nuances of claiming ERTC in the legal industry. 

About the ERTC and Eligibility Requirements 

The ERTC is a benefit that is provided to businesses as part of the CARES (Coronavirus Aid, Relief, and Economic Security) Act of 2020. 

It was designed to encourage small and medium businesses affected by the pandemic to keep their employees on payroll to help prevent even further economic instability and mitigate the financial impact forecasted. 

Eligibility for the ERTC for law firms is determined on a quarterly basis, and a law firm would have to meet either one of the two following requirements: 

  1. Experience a decline in gross revenue receipts of 50% or more in 2020 and 20% or more in 2021 in contrast to the same quarters in 2019, or
  2. Be subject to a full or partial government-mandated suspension of operations

Given nationwide courtroom disruptions, many law firms found themselves in a stressful position that made it challenging to provide legal services for their clients. The shift to virtual meetings alone could allow a law firm to qualify for ERTC funds under the “partial suspension of operations” requirement. 

It’s important to note that these tax incentives for law practices could be available if you experienced a decline in revenue up to the required threshold or an interference with operations. 

ERTC Eligibility for Law Firms 

ERTC funds can provide small law firms with much-needed cash flow in the aftermath of the pandemic, or the funds can be used to invest in systems, technical operations, or headcount. 

Even if your law firm did not experience a revenue decline that meets the required threshold, eligibility can still be found for virtually any kind of COVID-19-related suspension, including the following: 

  • Your law firm was shut down, even if only for a handful of days
  • You had to postpone a case due to a court being closed
  • A jury trial was postponed
  • You could not conduct an in-person deposition
  • In-person meetings with incarcerated clients were canceled or postponed
  • You had to reduce service offerings to your clients 

Claiming the ERTC

Though there have been several changes to the rules surrounding the ERTC, ERTC for law firms is still available. If your company has not yet claimed ERTC benefits for law offices, or you need to make a change to your last filing, you will need to file Form 941-X to get your tax credit. 

The deadline for claiming this credit is fast approaching, however. For the 2020 tax year, the deadline is April 15, 2024. For the 2021 tax year, you have until April 15, 2025. 

Unlike PPP loans and funds, there are no restrictions to how ERTC funds must be used, and you do not have to pay them back. 

Contact an Experienced Law Firm for Assistance to Claim ERTC Benefits 

Claiming the Employee Retention Tax Credit for legal firms requires being up to date with the most current laws to ensure IRS compliance for legal offices. At Dayes Law Firm, we have helped hundreds of small and medium businesses claim the maximum tax credit for which they are eligible. To find out the amount of ERTC benefits your law firm can claim, call us at 800.503.2000 for a free, no-obligation consultation.