The employee retention credit was introduced in the year 2020-2021 as a temporary coronavirus relief to help businesses retain their employees on the payroll. Since 2020, there have been several tweaks and changes done to this bill but recently, president Biden has extended the benefits of this bill till 2021. Isn’t this great news for both employees and employers?
Expert financial assistance firms have found out that there are several businesses that are still confused about whether or not they qualify for employee retention credit. If you are a business owner, before you move on to claim employee tax credit retroactively, you should be aware of the most common mistakes committed by businesses. Take a look at them.
I won’t be able to claim ERC since I have already claimed PPP
No, you are wrong! Congress had made sure that now a business can claim ERC even if it has already claimed PPP. There is no limitation on claiming one or the other. PPP can only account for 2.5 times your payroll expenses in a month and this fund is supposed to spread out over a span of six months. Since there will be a lot of uncovered expenses, you are always open to claiming ERC.
My business didn’t see a decline of 50% in gross receipts
You may not be aware but this CAA has brought about a change in the qualification criteria and hence now you can even qualify for years with a decline in revenue of 20%. However you can’t forget that there is one more way of qualifying for ERC – in case your business had been subject to a full or partial suspension given by the Government orders, you can also claim this tax credit.
My business didn’t shut down during pandemic
Even though the government orders a partial suspension of your business, you for ERC. Here is a list of a few scenarios under which you can be eligible to receive the employee tax retention credit.
- A distraction in your business
- Having Limited capacity
- A decline in the services provided
- The shutdown of vendors and suppliers
- Reduction of working hours to promote sanitation
- The shutdown of a few members of your business
- The shutdown of some business locations
So, now that you are sure about how to qualify for PRC, make sure you never commit the above-listed blunders that can keep you from reaping the benefits of this tax credit.