COVID-19 may be behind us, however, it is not too late to see if your business is eligible for government funded credits and grants such as the Employee Retention Credit (ERC). If your business was operating or started up during 2020 you were most likely affected by COVID-19 restrictions one way or another. It is worth identifying if your organization is eligible to receive the credit as it can be very beneficial. EFPR Group can assist in analyzing if your organization meets the eligibility criteria along with calculating the credit and guiding you through the entire process to claim ERC for your business.
Is My Business Eligible?
The credit is available to claim for the time period between March 13, 2020 through September 30, 2021. In order to determine if your business qualifies for the credit please see the eligibility requirements listed below:
- In 2020 the business reported a 50% or greater decline in revenue in any calendar quarter in 2020, compared to that same quarter in 2019
- In 2021 the business reported a 20% or greater decline in revenue during the first three quarters or the fourth quarter of 2020, compared to that same quarter in 2019
- Your business faced the inability to obtain goods or materials from its suppliers that were required to suspend operations due to a COVID-19 government mandate
- Your business was forced to reduce hours and/or staffing due to COVID-19 related government mandate
- Your business had COVID-19 related Government-mandated suspensions of any portion of operations during any quarter(s) of 2020 or during the first three quarters of 2021. The suspension of operations had to account for at least 10% of total employee service hours in the same quarter(s) of 2019
- If you were a business that was newly formed after February 15, 2020 you automatically qualify for Q3 and Q4 of 2021 without needing to meet the revenue reduction or partial suspension of operations test. The Maximum credit eligible is $50,000 per quarter for two quarters
If any one of the above requirement categories is applicable to your business, you may be eligible to receive a refundable tax credit for wages paid to employees through the Employee Retention Credit. Please contact EFPR Group as we can assist in the next steps of the process to claim the credit.
How is the Credit Calculated?
Once determined that your business does qualify for ERC, the next steps are to calculate the amount of credit the business is eligible to receive. In order to calculate the credit, payroll reports are analyzed including wages subject to FICA and employer-paid health care costs. It is important to note that foreign individuals and members of church organizations may not be subject to FICA and therefore not included in the credit. Below are the thresholds for determining what portion of wages are eligible to receive the credit:
- 2020: 50% of qualified wages, up to a maximum of $10,000 of wages for the entire year
o Maximum credit for 2020 is $5,000 per employee for the entire year
- 2021: 70% of qualified wages, up to $10,000 of wages, per quarter
o Maximum credit for 2021 is $7,000 per employee, per quarter
In addition to the wage restrictions above, there are also full-time employee limitations and related party restrictions. EFPR Group can assist in calculating and analyzing the organizations’ payroll to see what thresholds are met in order to calculate the total credit.
How Does My Business Claim the Credit?
Once the payroll reports have been analyzed and the credit amount to be claimed is calculated, the next steps would be to file Amended Form 941s ‘Employer’s Quarterly Federal Tax Return’ for each quarter that you qualify to claim the credit. EFPR can prepare and file these forms for your business.
If you believe that your business has met the requirements mentioned above to be eligible to claim the Employee Retention Credit please complete the form below to be connected with one of our specialists who can help you determine your credit eligibility along with preparing and filing the necessary forms in order to claim the credit. It is important to act on this now to receive the full benefit from the government-funded grant.