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  • Writer's pictureAntonise De Wet

Small Business owners take note of Employee Retention Credit: Don't leave money on the table

Updated: Dec 2, 2022


The Employee Retention Credit (ERC), the most attractive tax incentive, was recently amended by Congress. Available to entrepreneurs right now! Unfortunately, many business owners are disqualifying themselves because of out-of-date rules.

Many businesses that:

  • There was no decrease in revenue.

  • Claimed PPP

  • Were judged an essential business

You are still eligible for the Employee Retention Credit. The key to qualifying is not just revenue; if you had to change your day-to-day operations in any manner as a result of the pandemic, you are well positioned to earn federal cash to reinvest in your firm.





It has been astounding to see how many business firms (and frequently CPAs) as well as tax-exempt organizations are failing to take advantage of the Employee Retention Credit ("ERC"), which is intended to assist businesses and tax-exempt organizations in keeping the doors open and maintaining jobs, or, even better, growing and expanding (and creating more jobs) during these difficult economic times. The failure of business owners and tax-exempt managers to use the ERC is due to fundamental misunderstandings and confusion about the credit. The Joint Committee on Taxation (JCT) of Congress assessed the ERC as an approximately $80 billion temporary tax advantage for small and medium-sized businesses and tax-exempt organizations.


What Exactly Is The ERC?


The ERC is a refundable payroll tax credit developed as part of the CARAR +2.8%ES Act that was initially accessible from March 13, 2020 through December 31, 2020. The ERC was created to encourage firms to keep their staff on the payroll throughout the pandemic. Employers and borrowers who qualified for a Paycheck Protection Program loan might collect up to 50% of qualified salaries, including eligible health insurance expenses. The ERC was expanded under the Consolidated Appropriations Act (CAA). Employers who qualify in 2021 can receive a 70% credit on eligible earnings.


Who Can Apply For The ERC?

As an employer, you should know if you qualify for the employee retention credit (ERC) so you can plan for your company in 2022. The ERC is a tax credit granted to firms who retain and compensate their staff during periods of economic depression. An employer must have experienced a significant decrease in gross receipts or been subject to a government shutdown order to be eligible for the ERC. Furthermore, the company must have kept its personnel at 80% of its pre-downturn level. If a company achieves these requirements, it may be allowed to claim a payroll tax credit equal to 50% of wages paid to employees during the time of economic hardship.

So, who can claim the employee retention tax credit?

The employee retention tax credit is a refundable tax credit for qualifying employers that assists in offsetting the costs of maintaining and rehiring staff. An employer must have undergone a whole or partial stoppage of activities owing to the COVID-19 outbreak, or a considerable decrease in gross receipts, to be eligible. The credit is valid for qualified earnings given between March 13, 2020, and December 31, 2020. Employers can visit the IRS website for further information on eligibility and how to claim the credit. Common reasons why businesses are eligible for ERC include: 1) a decrease in revenue in any quarter of 2020 and/or 2021 compared to the same quarter in 2019.

  • Because many businesses were severely affected and had to adjust, a reduction in revenue is an obvious method to demonstrate that a company was harmed by the pandemic.

2) Complete or partial shutdown of your business

  • Due to regulatory limitations, several businesses were totally or partially closed down during the pandemic.


3) Failures in your supply chain or vendors

  • The pandemic had a significant impact on supply chains, especially given that countries were frequently closing their borders even when it came to trade during the peak of the outbreak.


4) Reduced service offerings

  • Whether it was due to changes in their supply chain that drove firms to cut their offerings, or a rule or legislation that required them to halt in-person operations, a reduction in services offered shows a negative impact.


5) A business interruption

  • If you can demonstrate any disturbance to your routine company operations, you may be eligible for the ERTC. With the possibility of ERC fraud, it is critical to thoroughly document which factors directly impacted your place of operation.


6) Inability to visit the job location of a client

  • Businesses that needed a physical presence were frequently the hardest damaged by the outbreak.

7) Critical items or supplies could not be delivered by suppliers.

  • During the peak of the pandemic, supply chain difficulties were a major concern. This one is especially simple to demonstrate.


8) Alteration in work roles/functions

  • The pandemic led many employers to lay off workers and restructure their organizations in order to reflect changes in their overall company.


9) Inadequate Travel

  • Flights were canceled in large numbers, and the pandemic affected the entire travel industry — which meant almost every other industry as well.

10) Inadequate Group Meetings

  • Lockdowns, quarantine, and other limitations made face-to-face encounters difficult at times. If your typical meeting cadence was disrupted, you may be entitled for the ERTC and can estimate your tax credit.


11) Changes in company hours or office closure

  • No business owner could have been fully prepared for the pandemic, so many were left holding the bag on expenses like office rental — the ERTC offers a chance to be reimbursed for it. In fact, any company that transitioned from in-office to remote or home-based work is likely eligible.


The ERC is concerned about Jobs.

The incentive was created to assist businesses and tax-exempt organizations in retaining jobs, but more crucially, GROWING AND EXPANDING jobs. The ERC was passed by Congress in order to assist not just businesses and tax-exempt organizations that had been harmed by the pandemic. However, Congress also sought to promote and help businesses and tax-exempt organizations that were thriving despite the pandemic and were maintaining or creating new jobs. When Congress appropriated $80 billion for the ERC, it was to aid in job creation across the board: job creation by struggling businesses, job creation by businesses treading water, and job creation by enterprises fortunate enough to go forward. It's all about employment for Congress.


Key Note: The ERC is a $80 billion tax scheme that hundreds of thousands of small and medium-sized enterprises and tax-exempt entities that would be suitable candidates for the ERC are overlooking. Significant tax benefits are being lost by business owners and tax-exempt managers, perks that can help keep and create jobs. Unfortunately, the workers who might profit from a firm or tax-exempt organization keeping or creating a job are the largest losers. The ERC is worth investigating further. The Employee Retention Tax Credit (ERC) is a government tax credit that provides businesses with a tax refund of up to $26,000 per W-2 employee. Your company may be qualified. If you got the PPP or had W-2 employees on your payroll in 2020/21.


Send me an email at paavan@kotiniandkotini.com if you want to apply before the 12/31/2022 application deadline.


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