In the wake of COVID-19, the US government implemented many relief programs for individuals and businesses alike. One of these relief programs was known as the Employee Retention Credit (ERC), which was available for both 2020 and 2021. But will businesses be able to claim an ERC for 2022? Here’s what you need to know about the ERC and claiming your credits.
What Is the ERC?
The ERC was a credit offered to business owners to encourage them to keep employees on the payroll, despite downturns in business during COVID-19. The initial ERC was slated to last from March 12, 2020, through the end of that year, but was extended twice through various legislation. Here are the various acts that the ERC fell under, and amounts that could be claimed during those time periods:
CARES Act – The CARES Act initiated the ERC on March 12, 2020, with the intent of expiring on December 31, 2020. Throughout this period, business owners could claim a refundable tax credit for 50% of qualified employee wages, with a maximum for each eligible employee for that year. Consolidated Appropriations Act – This bill extended the ERC through June 30, 2021, and implemented a credit of 70% of qualified wages, with a maximum credit for each quarter, per qualifying employee. American Rescue Plan – The ARP extended the ERC again, providing most businesses with an additional quarter to claim the credit, and scheduling the ERC to sunset in September. Some companies did qualify to receive a credit through the end of 2021 as well. Under the ARP, the ERC offered a credit of 70% of qualified wages as well with a maximum credit per employee per quarter.
But what about 2022? The ERC was not renewed for this year, so business owners cannot claim this credit for any quarters in 2022. However, if you missed any credits in the above time periods, you can still claim them. Here’s how.
Knowing If You Qualify
The first step in determining whether you missed out on these credits or not is to determine if you qualified during that time period. It’s worth noting that the ERC was not limited to a certain type of business; it was available to nearly all private-sector employers, as well as hospitals, universities, and 501(c) organizations. Instead, qualification was based on the size of the impact that COVID-19 had on your business. Proving that impact is quite simple:
Collect your gross receipts from each quarter included in the time periods mentioned above, as well as the gross receipts for the preceding year (2019).Compare your gross receipts for each quarter of the pandemic with the same quarter in 2019.If your gross receipts in a quarter in 2020 are below 50% of what they were pre-pandemic, you would qualify for the ERC, so long as the gross receipts for the next quarter did not exceed 80% of the same quarter in 2019. For 2021, the revenue threshold is only 80%.
If you need assistance with these calculations and determining how much of a credit you may qualify for, contact our business tax experts in Provo to schedule a consultation. Once we know that you qualify, we can help you to claim those missed credits from 2020 and 2021.
Claiming the ERC with a PPP Loan
We’d like to take a moment to mention that you can, in fact, claim the ERC even if you received a PPP loan during the pandemic. Initially, businesses that received a PPP loan did not qualify for the ERC. However, this was later changed so that all qualifying businesses could receive the ERC, regardless of PPP loan status. If you missed out on this refundable tax credit because you believed your PPP loan excluded you, you can still claim those missed credits.
Claiming Past Credits
To claim a past credit, you’ll need to amend the appropriate payroll returns. If you did not receive the Employee Retention Credits that your business should have received in 2020 or 2021, contact The Accounting Guys to schedule an appointment with one of our business tax experts in Provo. We’ll help you determine which quarters qualified you for the ERC, as well as the credit amount that you can claim. Then, we’ll help you file or amend your returns. Call now to schedule your appointment.