Employee Retention Credit (ERC) Still Available for Small Businesses Affected by COVID
July 29, 2022
By Robert J. Waine, Esquire
For certain small businesses that conducted business during the pandemic, there is still time to claim the Employee Retention Credit (“ERC”), if you have not done so already. The ERC is a refundable tax credit against certain employment taxes. For the period from March 12, 2020, to December 31, 2020, the ERC is 50% of qualified wages paid to an employee up to $10,000. The maximum credit is $5,000. The ERC for the period from January 1, 2021, to September 30, 2021, is 70% of qualified wages for the first $10,000 in wages paid per employee for each quarter, so the maximum credit could be $21,000 per employee. In addition, certain recovery startup businesses can claim the ERC for the fourth quarter of 2021. The IRS defines a recovery startup business as any employer:
(A) which began carrying on any trade or business after February 15, 2020, and (B) for which the average annual gross receipts of such employer (as determined under rules similar to the rules under section 448(c)(3)) for the 3-taxable-year period ending with the taxable year which precedes the calendar quarter for which the credit is determined under subsection (a) does not exceed $1,000,000.
To qualify for the ERC, your business must have 500 or fewer employees and: (1) your business was fully or partially shut down due to a government order during any part of the quarter; or (2) the business’ gross receipts in a quarter declined more than 20% in 2021 (for 2020 the decline must be more than 50%) compared to either (i) the same quarter in 2019 or (ii) the immediately preceding quarter in 2020 or 2021. Businesses that received PPP loans can claim the ERC; however, wages used to apply for PPP loan forgiveness cannot also be claimed as ERC wages. Even if you have filed all your tax returns, there is still time to file an amended return to claim the ERC. If you need assistance, contact us online or call (412) 338-1169.