WHO QUALIFIES TO CLAIM THE ERTC?
You likely qualify if you own a small business and experienced a reduction in revenues, or any of the following in 2020 and/or 2021:
The Employee Retention Tax Credit (ERTC) was enacted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to support small business owners through the government-imposed shutdowns. By claiming the ERTC for 2020 and 2021, employers can receive up to $26,000 per employee in the form of a direct payment from the IRS.
Full or partial shutdown
Reduction in operating hours
Distribution interruptions
Supply chain disruptions
Inability to work onsite or visit clients
IN 2020, TO BE CONSIDERED A SMALL BUSINESS, YOU HAD TO EMPLOY LESS THAN 100 FTES. IN 2021, THE LIMIT WAS RAISED TO 500 EMPLOYEES. BOTH REQUIRE THE BASE NUMBER OF EMPLOYEES TO BE CALCULATED FROM 2019 EMPLOYMENT RECORDS.
The ERTC outlined in the CARES act is more restrictive, and is based solely on the quarterly comparison of gross receipts from 2020 to 2019
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Gross receipts in each 2020 quarter must be 50% less than the same quarter in 2019.
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By meeting the above requirement, you’re entitled to a refundable tax credit equal to 50% of qualified wages and health care costs paid.
Congress passed additional legislation in 2021 that provided another way a business could qualify for the ERTC, and that is forced closure. A business must satisfy only one of the following two conditions to claim the ERTC in 2021
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Your business was fully or partially suspended or had to reduce business hours due to a government order; or
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A drop of at least 20% in quarterly gross receipts as compared to the same quarter in 2019.
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By meeting one of the above conditions, you’re entitled to a refundable tax credit equal to 70% of wages and health care costs paid