The Employee Retention Credit (ERC) has been infusing small to mid-sized businesses with cash across the country since it was passed under the CARES Act, to encourage businesses to keep their employees on payroll. Qualifying employers can receive up to $26,000 per employee from this program, yet many businesses have not yet taken advantage of the ERC because they don’t think they qualify. Here are a few common misconceptions about the credit:
“Our business flourished during the pandemic. Our sales were up year over year. I don’t think we qualify for this program.”
ERC qualification does not only depend upon a company’s reduction in gross receipts during the pandemic. Another way to qualify for the credit is to demonstrate that a business segment that was greater than 10% of the whole company was more than 10% adversely affected by the various government Covid shut down laws limiting businesses and partially suspending operations. Many companies flourished in one sector of their business, which drove their overall gross receipts up, but were hurt in another sector. We like to ask clients “give us your indoor dining equivalent” when referring to a restaurant that flourished during Covid times due to curbside pickups and delivery sales, but their indoor dining suffered due to the capacity shut down laws.
“Like some of the other government incentive programs, it’s too late, we missed the deadline!”
Not true. The Statute of Limitations to claim Employee Retention Credits for applicable quarters in 2020 begin to expire in July 2023, and in April 2024 for applicable quarters in 2021.
“We received PPP funds. It’s my understanding that we can’t also claim the Employee Retention Credit.”
The CARES Act was amended allowing PPP recipients to also take advantage of the ERC program. For such companies, it is true that we cannot use the same wages that were paid with their forgiven PPP loans to calculate their ERCs. However, there are typically plenty of excess wages during the qualifying quarters with PPP interplay to generate robust ERCs in those quarters.
If your business qualifies for the ERC, the IRS will send a check directly to you, and you can claim the credit retroactively. This is a great opportunity to get an influx of cash for your business! Abedian + Totlian can assist your company in getting the ERC; give us a call (818) 243-3455 to learn more and to see if your business qualifies.