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How Do Employers Qualify for the Employee Retention Tax Credit?

 Some Great News for Entrepreneurs and Business Owners!

As we talked about in our first short article (https://mlsmarketing360.com/blog/What-is-the-Employee-Retention-Tax-Credit) the upgraded Infrastructure Financial Investment and Jobs Act, employers have actually been offered a 'gift' from Uncle Sam with the extension of the Employee Retention Tax Credit. It can add up to numerous thousands of needed dollars to all types of business owners across America.

 This short article is the second among several where we'll be providing, highlighting eligibility, qualified earnings, how the credits work and more. It also marks by law and date because, depending on whether you took a Paycheck Protection Program (PPP) loan and when you declare the credit, there are different requirements.

Let's start ...

 How Do Employers Qualify for the Employee Retention Tax Credit?

 A lot of employers, consisting of all types of businesses from medical establishments to hospitals, to churches to educational companies, to contractors and to nearly every restaurant and bar in the country can qualify for the ERC tax credit.

Formerly, the Consolidated Appropriations Act expanded qualifications to allow business owners who took a loan under the Paycheck Protection Program (PPP), including borrowers from the first round of PPP who initially were ineligible to declare the tax credit.

Qualification is figured out by one of two aspects for qualified companies-- and amongst these elements needed to apply is the specific calendar quarter the company wants to make use of the credit:

  1. A business that was fully or partially shut down or needed to cut back service hours due to a federal, state or local government order. The credit applies only for the portion of the quarter that the business is suspended...It does not count the whole quarter. Some organizations, based on IRS guidance, usually do not satisfy this aspect test and therefore would not qualify.
  • Businesses that were considered essential with some qualifications.
  • Businesses shut down on site but still able to continue operations mostly intact via offsite telecommuting.

Nevertheless, (Good News!) any of these businesses still might receive the credit with the 2nd element test.

    2. A company that has a substantial decrease in gross invoices.

   3. Recovery Startup Business

American Rescue Plan Act of 2021 has added a 3rd category in which those businesses that qualify may be able to qualify for credits up to $50,000 per quarter. Here's how a business owner can qualify as a Startup Business...

Must have begun trade or business after Feb. 15, 2020

Must have less than $1MM in annual gross receipts

Must not be eligible for the ERTC in either of the first two categories discussed above.

 IRS notice 2021-49 explained that 'Recovery Startups' can use all qualified employee wages for purposes of the credit, and different from other qualified businesses, they can qualify regardless of the number of employees.

It should also be noted that determining if this category applies is assessed for each quarter. Again, as we've previously discussed, there are many nuances in these determinations, so be sure to employ expert advice and read the rules and regs thoroughly.

IRS notice 2021-49 is very important in understanding how to apply upcoming changes to Form 941 necessary to claim the credit. Form 941-X is the form that will be used to retroactively file for the applicable quarter(s) in which the qualified wages were paid.  


Stay Tuned for the next edition as we discuss the question of What Kind Of Wages/Salaries Qualify for the ERC. And those that DON'T qualify. 

As we can readily see, the process of determining our eligibility for the ERTC is an arduous one and full of twists, turns and opaque nuances. At "ERTC Blueprint", business owners can quickly and easily discover what they qualify for through a quick and simple 10 question form, no cost, no obligation. 

Our CPA's are ERTC experts, focused solely on helping small businesses claim what is due to them through the Employee Retention Tax Credit program from Uncle Sam.

Check out www.ERTCBlueprint.com and find out what you're owed today.

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