What Innovations Can Businesses Use to Leverage the ERTC?

October 12, 2023
Dayes Law Firm

Business innovation is key to growing your company, but it’s hard to innovate if you don’t have money to pay employees. Enter the Employee Retention Tax Credit, or ERTC, which rewards employers who kept workers on payroll throughout the pandemic.

ERTC innovations and employee retention strategies have helped keep many businesses afloat over the past few years. Below, learn more about tax credit utilization and how to make the ERTC work for you.

The ERTC Explained

If you haven’t heard about ERTC tax credit benefits yet, we’ll briefly explain. This credit provides up to $5,000 per employee kept on payroll in 2020 and up to $7,000 per quarter per employee for 2021.

Tax credit eligibility requirements include one or both of the following:

  • You had a major drop in gross receipts (at least 80% in 2020 or at least 20% in 2021)
  • You were forced to close your business, either fully or partially, in response to a government order

Many business owners don’t bother trying to claim the ERTC because they don’t think they qualify. However, by thinking outside the box and learning a few ERTC innovations, you could find that you do, in fact, qualify for this credit.

“Qualified Wages” May Cover More Than You Think

To be eligible for the ERTC, you must have paid what the IRS calls “qualified wages” to employees in 2020 and 2021. Some businesses don’t realize that “qualified wages” include any healthcare costs paid to employees.

That means if you paid your employees’ health insurance premiums, you can count those costs as part of your qualified wages. Doing this can boost your credit amount significantly.

You May Qualify Even If You Took a PPP Loan

During the pandemic, many businesses took out Paycheck Protection Program (PPP) loans to avoid having to lay off employees. Originally, the IRS barred businesses that took PPP loans from claiming the ERTC. Businesses could only claim the credit if they didn’t take a PPP loan.

The IRS has since rescinded that requirement. This means you can claim the ERTC and take advantage of tax credit optimization even if you accepted a PPP loan.

The ERTC Supports Recovery Startup Businesses

If you started a new business on or after February 15, 2020, you may qualify for the ERTC as a recovery startup business.

To be eligible as a recovery startup business, you’ll need to meet the following requirements:

  • You have at least one W-2 employee, not including family members
  • Your gross receipts totaled less than $1 million over the past three years
  • You’re not otherwise eligible for the ERTC due to a drop in gross receipts or closure because of a government mandate

Boosting Profits by Referring Businesses to ERC Processing Companies

Even if you don’t qualify for the ERTC, you may still be able to boost your bottom line by referring other businesses to an ERC processing company. These companies help businesses understand whether they’re eligible and apply for the credit on their behalf.

Many ERC processing companies offer a bonus to those who refer business to them. The amount varies by company, though, so it’s impossible to say how much you can earn.

Learn More About This Valuable Credit

Want to learn more about this credit and other ERTC innovations available to you? Contact Dayes Law Firm at (866) 567-4510 now.