How to Determine if Your Business is Eligible for Employee Retention Credit (ERC) Relief!
- levinaas
- Mar 23, 2023
- 2 min read
The Employee Retention Credit (ERC) Relief is a crucial financial lifeline for businesses that were affected by the Coronavirus pandemic in 2020 and 2021. If you're a business owner, you may be eligible for this tax credit, which provides up to $26,000 per employee. We will outline the key criteria for determining your business's eligibility for the ERC relief.
Eligibility Criteria
Suspend Operations due to a Government Order
To qualify for the ERC relief, your business must have been forced to suspend operations partially or fully due to a government order relating to the COVID-19 pandemic. This includes stay-at-home orders, social distancing measures, and capacity limitations that prevented your business from operating at its usual capacity. If your business was able to operate remotely or through curbside pickup or delivery without significant disruption, it may not qualify under this criterion.
Decline in Gross Receipts
Another key factor in determining your eligibility for the ERC relief is whether your business experienced a decline in gross receipts when compared to the same quarter in 2019. To qualify, your business must have seen a decline in gross receipts of at least 50% in any quarter of 2020, or a decline of at least 20% in any quarter of 2021, when compared to the same quarter in 2019. This decline in revenue demonstrates that your business was significantly impacted by the pandemic and is therefore eligible for the tax credit.
Employee Threshold
The ERC relief is designed to support small and medium-sized businesses, so the number of employees you have plays a critical role in determining your eligibility. To qualify for the ERC relief, your business must have had less than 500 full-time or part-time employees in 2019. Seasonal workers and independent contractors do not count toward this employee threshold.
Impact of Coronavirus
Finally, to be eligible for the ERC relief, your business must have been impacted in some way by the Coronavirus pandemic. This can include disruptions in your supply chain, a decline in customer demand, or an increase in costs related to pandemic-related safety measures, such as personal protective equipment (PPE) or cleaning supplies. As long as your business can demonstrate that it was negatively affected by the pandemic, you may be eligible for the tax credit.
The Employee Retention Credit (ERC) Relief can provide significant financial support for businesses that operated in 2020 and 2021 and were impacted by the Coronavirus pandemic. By understanding the key eligibility criteria, such as suspended operations, a decline in gross receipts, employee thresholds, and the impact of the pandemic, you can determine whether your business is eligible for up to $26,000 per employee in tax credits. Consult with a tax professional to ensure that you are claiming the correct amount of credit and adhering to all necessary regulations.