Employee Retention Credit "ERC", a credit that, for eligible businesses, provides a very significant cash benefit (up to $26,000 per employee during 2020 and 2021), critical for struggling businesses. We would be glad to assist you—free of charge—in determining whether you qualify for the credit, and in what amount. As eligibility determinations and computations can be complex, even if you already believe you have taken advantage of the credit, we welcome the opportunity to provide you with a second opinion.
Note, you can receive this credit even if you were awarded Paycheck Protection Program (PPP) funding. However, before you apply for PPP forgiveness, it is important to speak with a professional regarding maximizing PPP forgiveness and maximizing the ERC, as the two are interrelated. There are two ways to qualify for the credit:
First, if your business was affected by a mandated full or partial suspension of business then you automatically qualify for the ERC. This includes any actual closures, as well as restrictions on hours or capacity. It is important to note that this provision may also extend to suppliers of the business. If the facts and circumstances indicate that the business’s operations were/are fully or partially suspended as a result of the inability to obtain critical goods or materials from its suppliers because they were required to suspend operations, then the business may be considered an eligible employer for calendar quarters during which its operations are fully or partially suspended and may be eligible to receive the employee retention credit. Our comprehensive analysis of each client's situation includes a consideration of all facts and circumstances related to any suppliers.
The second way to qualify, is based on a significant reduction in gross receipts. In 2020 your business gross receipts must be down 50% compared to the same quarter of 2019 in order to qualify. In 2021 this requirement is even easier to meet, because you only need a 20% reduction in gross receipts to meet the test.
The attorneys at Frost Law have been following the Employee Retention Credit program carefully since its inception. We have created this informative page for anyone looking to better understand the ERC program. There are many myths and misconceptions regarding the eligibility of businesses, below our team sets straight any confusions.
❌ MYTH: A business that has already received Paycheck Protection Program (PPP) loans or had its PPP Loans forgiven, cannot claim ERC.
✅ TRUTH: Businesses can utilize both programs! This limitation was removed in the Consolidated Appropriations Act (CAA) of 2021.
❌ MYTH: A business did not have a drop in gross receipts of 50% or more and is therefore not eligible for ERC.
✅ TRUTH: The (CAA) reduced the qualification from 50% to 20% for the first three quarters of 2021.
❌ MYTH: A business did not shut down during the pandemic, so it is not eligible for ERC.
✅ TRUTH: A business impacted by a partial shutdown, disruption to supply chain, vendor, or business operations, limited hours and capacity or had restricted access to equipment or experienced a significant decline in revenue, may still qualify for ERC.
❌ MYTH: A business was deemed essential, so it does not qualify.
✅ TRUTH: A business that experienced an impact or change to operations or a decline in revenue may still qualify for ERC (See TRUTH above for more).
❌ MYTH: A business must have fewer than 500 employees in order to be eligible for ERC.
✅ TRUTH: A business’s employee count restriction is based on full-time equivalent (FTE) employees, rather than everyone in the workplace.
❌ MYTH: A business had increased sales during the pandemic, so the business is not eligible for ERC.
✅ TRUTH: Although a business has grown, it may still be eligible if it was impacted by a full or partial suspension of operations due to a governmental restriction.
❌ MYTH: A business' sales rebounded in Q1 of 2021, so it is not eligible for ERC.
✅ TRUTH: The (CAA) allows a business to determine its eligibility based on lost revenue in 2020 quarters or a suspension in operations.
❌ MYTH: A not-for-profit cannot claim ERC.
✅ TRUTH: Non-profit organizations such as non profit hospitals, churches, museums, etc. are eligible for ERC.
We know the intricacies of the ERC are confusing, Frost Law is offering initial free consultations to determine ERC availability. Contact our team at (410) 497-5947 or fill out our brief contact form to schedule your free initial confidential consultation. If you would like to learn more on ERC and PPP please watch this video hosted by Rebecca Sheppard and Matt Eddleman of Frost Law.
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