The ERC is a tax credit that helps businesses retain employees during challenging times by providing a credit against employment taxes. It’s designed to support companies facing financial challenges like the COVID-19 pandemic. The credit is based on a percentage of qualified wages and has been expanded and extended to offer more assistance. Below are some frequently asked questions answered during the Calvetti Ferguson webinar on the Employee Retention Credit (ERC) led by tax incentives partner Bryan Valencia.
I filed for a PPP loan and was forgiven. Does this disallow me to claim the ERC?
No, it does not disallow you to claim the ERC, but it will impact the dollars of qualified wages that you can use in the calculation. When rules under the CARES Act came out, some organizations chose to pursue a PPP loan as opposed to an ERC in which, under the new legislation, you can elect both. If you are in that situation where you claimed a PPP loan and think you need help getting the ERC, it is worth seeing if your numbers work out.
I have 250 full-time employees (FTE). Am I eligible?
You could be eligible. The ERC is a tax credit designed to support businesses that retain employees during specific qualifying periods, particularly during economic hardship, such as the COVID-19 pandemic. The credit amount and calculation method depend on the size of your business.
How does one claim the ERC?
Eligible employers can claim the ERC on an adjusted employment tax return from March 13, 2020, to December 31, 2021, with Form 941-X. However, they must meet at least one of the following criteria:
1. The business had a full or partial suspension of operations due to a government order
- Order can either be made from a federal, state, or local government or supply chain disruption
2. The business had a significant decline in gross receipts
- For the year 2020, gross receipts for a quarter experience at least a 50% decline for the same calendar quarter in 2019
- For the year 2021, gross receipts for a quarter experience at least a 20% decline for the same calendar quarter in 2019
3. The business is a recovery startup
- This criterion is only available for the third and fourth calendar quarters of 2021 only
When does the statute for the ERC close?
The statute is three years from when you would have filed the final 941 forms. For 941 forms filed in 2020, the last time you can amend them is April 15, 2024. While 941 forms for the first two quarters of 2021 will have a deadline of April 15, 2025, and for the last two quarters, there will be a 5-year extension, making the deadline April 15, 2027.
Why choose Calvetti Ferguson over other accounting and consulting firms?
Calvetti Ferguson is looking out for your best interest, not trying to generate a fee. The employee retention tax credit provides a compelling savings opportunity that companies can not afford to miss. Whether your business is in manufacturing, technology, software, engineering, construction, or energy, you may be unaware of additional savings that could be significant. We’ll help make the tax laws work for you.
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