The Employee Retention Credit (ERC) is a fully refundable payroll tax credit many business owners are still eligible to claim, even though it applies to quarterly employment taxes businesses were required to pay for tax years 2020 and 2021. There are specific guidelines to follow to apply for the ERC retroactively, particularly when it comes to a certain type of business called a recovery startup business.
What is the ERC?
The Employee Retention Credit was created to help business owners weather the financial difficulties that came with the height of the COVID-19 pandemic.
The credit encouraged eligible companies to retain W2 employees on their payroll, and businesses that met the criteria could receive a maximum of $26,000 per employee.
Who is Eligible to Apply for the ERC?
There is some complexity to ERC eligibility, but in general, employers are qualified to claim the ERC for 2020 if their business underwent either a full or partial suspension of the operation of their business during any quarter that year due to government orders restricting specific activities, or if the business had a substantial drop in gross receipts by more than 50 percent as compared to the same quarter from the previous year.
For 2021, ERC eligibility criteria is slightly different. Employers can retroactively claim the Employee Retention Tax Credit if they conducted business that year and experienced similar operations suspensions or if their business experienced a reduction in gross receipts in the first, second, or third calendar quarter in 2021 and the gross receipts of that calendar quarter are less than 80 percent of the gross receipts in the same calendar quarter for 2019.
To apply for the ERC, businesses need to gather specific documents and information in order to present accurate details for their application. A team of skilled tax professionals like the ERC team at Dayes Law Firm could be beneficial in helping you navigate the process for your business.
What is a Recovery Startup Business?
Your business may qualify as a recovery startup business, as defined by an explanation provided by the Legal Information Institute of Cornell Law School – and linked to by the IRS – if it started after mid-February 2020 and provided that its gross receipts don’t exceed $1 million. If your business has one or more employees, not including owner-operators or family members, your business might potentially fit within this definition.
According to the IRS, “Most taxpayers became ineligible to claim the ERC for wages paid after September 30, 2021.” However, recovery startup businesses can still claim the ERC for wages paid after June 30, 2021, and before January 1, 2022.
Determining your eligibility for the Employee Retention Credit comes down to the individual circumstances of you and your business. Whether or not your business is considered a recovery startup business, it could be eligible to retroactively claim the ERC. The tax lawyers at Dayes Law Firm can help you establish your overall eligibility.
The ERC Team at Dayes Law Firm
Dayes Law Firm and its partners have extensive experience when it comes to helping businesses with tax law needs and with the ERC in particular. Our team has already assisted in filing for more than $250 million in refunds, and we want to help you and your business, too.
If you’re looking to apply for the ERC specifically as a recovery startup business, please give our team a call or fill out the form on this page as soon as possible. ERC deadlines are fast approaching and we don’t want your business to miss out on this important program!
Contact us today to see how the team at Dayes Law Firm can help you with the ERC, or with any other tax credit assistance today.