The COVID-19 pandemic was a difficult time for everyone- including businesses. Many business owners were unable to retain their employees, and others kept them on the payroll when work was suspended- often at great cost to the company. By continuing to pay people even when business was restricted or impossible, many small business owners struggled or even succumbed to financial pressures. Luckily, there is a way to recover.
Employee Retention Credit (ERC) is a financial relief program for those who continued to pay their staff during the suspension of operations. It is based on qualified wages during a set time period between 2020 and 2021 and serves to reward and lift up the businesses that paid employees throughout the pandemic.
Ready to receive up to $26,000 per employee? Get Qualified Today
Your business could be eligible to claim up to $26,000 per employee- but time is running out. There is a ticking clock on how long people have to submit their claims and receive the credit. Now is the time to make it happen and find out if you are an eligible employer.
The program has now officially ended, but there is still some time left to claim retrospectively for any time your business was applicable. Don't wait to find out if you qualify! Even businesses that applied in the past and didn't qualify should take another shot. The ERC program has gone through many changes and is very complex, so you could still have a chance.
It is important to understand that this program is complicated and requires detailed documentation to yield the best possible outcome. Many people struggle to understand exactly what they can claim- and we don't blame them! The essential thing is to not let a lack of confidence or uncertainty about whether or not you qualify to hold you back from going after what could be a game-changing sum of money.
BottomLine Concepts is here to help you understand and pursue Employee Retention Credit- and to give you the best possible chance at maximum credit recuperation. We take you through the entire process with dedicated end-to-end service on a no-risk, contingency-only basis.
To give you some insight into what the program is all about and how it could affect you, we have compiled a run-through of the must-know details. Find out more about how the program works before reaching out to our team of experts for dedicated support and service to pursue your claim to the fullest capacity. Here is our complete guide to ERC with all your questions answered.
In a Nutshell: What Is Employee Retention Tax Credit?
To summarize, the Employee Retention Credit was a program launched during the COVID-19 pandemic that provided some relief to businesses who chose to continue paying wages even when their operations were suspended and (or) their gross receipts were affected. The refundable tax credit was designed for small businesses that pay qualified wages. It was active throughout 2020 and most of 2021. It is not a loan- it is a grant.
What Was the Purpose of ERC?
The whole point of the Employee Retention Credit was to help and encourage small businesses to maintain payments to staff wherever possible- and ultimately help support people through the pandemic. Providing the incentive of a refundable tax credit acted as a float for these SMEs and impacted their ability to sustain their operations and human resources.
Who Qualifies for Employee Retention Credit?
Any small business that maintained payroll throughout the pandemic and can prove suspension of operations or decreased revenue resulting from COVID-19 measures could be entitled to thousands of dollars worth of refundable tax credit.
Here are the more specific requirements of an eligible employer based on the most up to date legislation and implemented acts:
A full or partial shutdown of your business was required by a governmental authority and complied with by your employees in 2020 and 2021 due to COVID-19.
If the ability to run normal operations was limited due to travel restrictions, commerce, interrupted supply chains, health and safety regulations, or prohibited group meetings, you may also qualify.
The gross receipts of incomings during the impacted quarters total to less than the matching quarter in 2019 (pre-COVID). A loss is not necessarily required if other conditions are met (more about that later).
Although you may be eligible for ERC even if you already received a PPP loan (Payment Protection Act) after new legislation from 2021, the tax credit cannot apply to the same wages.
Bear in mind that you could qualify for some quarters and not others, so it is always worth applying even if it only covers a shorter timeframe. There are also varying rules from year to year which could impact the overall claim amount. An advisor at BottomLine Concepts can support with this. The Disaster Tax Relief Act determined that an otherwise eligible employer could still claim the tax credits even if they received PPP loan forgiveness. Also, recovery startup businesses could be eligible for wages paid in the third and fourth quarters of 2021.
How Employee Retention Credit Works
Let us start by saying that the Employee Retention Credit is complicated. There were several rules added and removed over the year and a half when the credit was active, and retrospective legislation has also moved the goal posts.
Credits should be claimed against Medicare taxes for 2021, even though they were claimed against Social Security taxes in 2020. The change came with the Americal Rescue Plan Act and applied to qualified wages paid after June 30, 2021. The total credit amount remains the same. Additionally, if the credit exceeds the total liability portions of your Medicare or Social Security taxes it is then refunded and reconciled in the 941 form for the employee's federal employment taxes.
BottomLine Concepts has in-depth knowledge and experience working out the credits and ensuring all documentation is correctly submitted on your behalf to ensure things go smoothly. Don't worry if it sounds complicated now- our friendly experts can walk you through each stage and make the whole process a bit less intimidating. Even after your claim, we can help explain what to do next and ensure compliance with all procedures.
When Was It Applicable?
Employee Retention Credit applies to qualified wages paid in 2020 (from March 13) and for the first three quarters of 2021 (until September 30). The Infrastructure Investment and Jobs Act, which was signed by President Joe Biden in November 2021 officially ended the credit retroactively. Only recovery startup businesses can claim for qualified wages after September 30, 2021, with an extended cut off of December 31. Don’t waste time and see if you qualify before it’s too late.
What Is the Cut Off to Apply?
Although the tax credit is no longer applicable, an eligible employer can still claim for qualified wages paid during the applicable timeframe. Currently, the cut off is 2024, meaning small businesses should submit their claims before the end of 2023.
This leaves enough time to look back over payroll costs during 2020 and 2021 and seek professional guidance to secure your chance at receiving Employee Retention Credit. It can be a complex task that takes time- especially with the changes made to the program under the various applicable acts (see below). Luckily, BottomLine Concepts can help speed up the process by carrying out an in-depth analysis of your business and its eligibility- including a full overview of what wages qualify and for what time periods.
How Much Can Businesses Claim?
Several factors impact how much refundable tax credit a business is entitled to:
What quarters is the employee eligible to claim in?
How many employees remained on the payroll?
Did the business take a PPP loan?
Here are the specifics per employee under the current Employee Retention Credit guidelines.
The CARES Act of 2020 is what kick-started the ERC program. It applies to all eligible employers- including those who took a PPE loan- and is relevant for all quarters between March 12, 2020, and September 30, 2021. Employers can claim for 50% of qualified wages up to $10,000 per employee for each year.
Consolidated Appropriations Act
The terms of the Consolidated Appropriations Act of 2021 are slightly different. It also applies to all small businesses who qualify, even if they took a PPE loan. With this act, they can claim the credit against 70% of paid wages, and allows up to $10,000 per employee per quarter.
American Rescue Plan Act
The American Rescue Plan Act didn't come into play until slightly later and only applies to qualified wages paid in 2021. It covers up to $7000 per employee per quarter, with the possibility for up to $50,000 in credits for recovery startup businesses for the last two quarters of 2021.
Claim Differences between 2020 and 2021
When the Consolidated Appropriations Act and American Rescue Plan Act were introduced in 2021, they changed the tax credit specifics. This matters because eligible employers can claim different amounts for different quarters- and with different criteria!
In 2020, business would qualify from the first quarter where gross receipts were less than half of what they were in the same calendar quarter of 2019 and ended when the gross receipts reached at least 80% of their 2019 counterparts. It amounted to a maximum credit of 50% of $10,000 worth of paid wages annually.
When it came to 2021, the maximum credit increased to $21,000 annually per employee, as the percentage changed to 70, and wages were calculated quarterly rather than annually.
What Are Qualified Wages in Employee Retention Credit?
Generally speaking, any wages or compensations paid that fall under FICA taxes are considered qualified wages. Remember, they must have been paid between March 12, 2020, and September 30, 2021 (or until the end of December for recovery startups) and cannot have already been forgiven under a PPP loan.
Employees can still claim Employee Retention Credit after using the Paycheck Protection Program Act, but not on the same wages. Even if the wages are expected to be forgiven, they are not applicable. Another factor in overall qualified wages is the qualified health plan expenses. These are calculated by the IRS in several ways, and usually include the pre-tax portion rather than after-tax numbers.
How Does the Number of Employees Impact Employee Retention Credit and Qualified Wages?
The number of full-time employees directly impacts the applicable qualified wages. Employees should always determine the exact number of full-time staff they have before launching a claim. According to the terms of the retention credit, a full-time employee must have worked at least 30 hours per week or 130 hours per month in any calendar month in 2019.
Under the CARES Act, an employer can only claim for all wages paid to all staff if they have 100 or fewer full-time employees. That means all payroll costs to working staff and non-working staff falls under qualified wages. If there are more than 100, only the wages of those who are not working in any capacity qualify for Employee Retention Credit.
When the Consolidated Appropriations Act came into play, the limit was increased to 500 employees. There was also further relief given to the hardest-hit business operations (those who suffered a significant decline in revenue and gross receipts) for the end of 2021 under the American Rescue Plan Act.
Things to Know about the Employment Tax Credit Retroactive Termination
Penalties apply to those who do not deposit their credits correctly.
The penalties for failure to deposit, and the conditions required to avoid them, are listed in IRS Notice 2021-65. An employer (with the exception of recovery startups) must repay the amount in their federal income tax if they reduced their employment tax deposits in anticipation of receiving Employee Retention Tax Credit until the end of 2021 but were ineligible because of early program termination.
If advanced Employee Retention Credit payments for qualified wages paid in the final quarter of 2021 were awarded, they must be repaid before the due date given for their federal employment taxes.
What Mistakes do People Make when Claiming Employee Retention Credit?
There are many mistakes made during the Employee Retention Credit application process- most of which are things that stop people from properly pursuing a claim. In many cases, a lack of understanding about what ERC is and who it applies to gets in the way of potential refunds, which is why everyone should speak to BottomLine Concepts before taking their hat out of the ring.
Here are some misconceptions and mistakes regarding Employee Retention Credit, eligibility requirements, and applications.
Misunderstanding How a PPP Loan Affects Their Right to Claim the Credit
Too many businesses miss out on their chance for thousands of dollars of Employee Retention Credit because they assume their PPP loan forgiveness disqualifies them from even applying. This is not the case at all!
When the program first began in 2020, it was true that it interfered with an employer's right to claim, but that all changed in 2021 with the introduction of the Consolidated Appropriations Act and the Disaster Tax Relief Act.
Remember, PPP generally only covers around a quarter of wages paid, whereas ERC stretches as high as 70%, so there are plenty of expenses unaccounted for and claimable.
Forgetting the Drop Percentage in Gross Receipts Has Changed
Again, a lot of rules changed and impacted who can claim and how much they can claim. One of those changes was the dip percentage in gross receipts- a.k.a. how much revenue loss was required for eligibility. The figure initially sat at 50% but was subsequently lowered to 20%- making the threshold significantly lower and the range of businesses able to qualify much wider.
Also, it is important to remember that suffering a loss of income on the gross receipts is not the only way to qualify got Employee Retention Credit. Depending on the circumstances, a business may still qualify- even if it didn't suffer an overall loss of 20% or more if business operations were suspended under government order.
Thinking they are Not an Eligible Employer because they Didn't Close During COVID-19
A major misconception about Employee Retention Credit is the belief that only businesses that completely shut down and ceased all operations during the COVID-19 pandemic can claim for qualified wages paid. This is simply not the case. Many businesses that were only partially suspended can also qualify if any of the following conditions apply:
Some employees were unable to work but were still paid.
Business operations shut down in some areas but not everywhere.
Operations continued but with a reduced service offered.
Working hours had to reduce for health and sanitation reasons.
Supply chains were impacted due to vendor shutdowns.
A limited number of customers could be served for hygiene reasons.
Equipment or working premises were inaccessible.
Any other justifiable interruption of business may qualify.
Any type of partial shutdown of business operation may be eligible.
There are many reasons someone can be deemed an eligible employer. The two essential stipulations are that the business was impacted negatively in some way and that government orders meant things could not run as they did before.
Not Applying because 'Essential Businesses Don't Count
Although some businesses were considered essential operations and were exempt from government-ordered suspensions and shutdowns, they could still be eligible for Employee Retention Credit in some way. In some cases, only part of the business may be deemed essential- meaning some services had to shut down- ultimately impacting employment and income.
Also, even an essential business could have suffered due to vendor shutdowns, interrupted supply chains, and restricted worksite access- all of which can negatively impact operations. If that were the case, it could make the company an eligible employer based on the criteria explained in the previous point.
Assuming Business Growth Disqualifies You from Applying
Some lucky small business operations grew during COVID-19. Just because there was no financial loss doesn't mean they can't apply for Employee Retention Credit. If there was any partial or full suspension at any time with wages paid throughout, there could be grounds to claim.
Taking a Sales Rebound as Grounds for Ineligibility
Again, increased sales or signs of recovery don't disqualify people from the Employee Retention Credit program. Lost revenue in 2020 with qualified wages paid is still claimable- even if sales rebounded in 2021. Plus- the same rule applies in almost every situation- if you have to suspend operations at any time due to government demands, you have the right to apply as an eligible employer!
Believing Your Business is Too Big to Apply
The Employee Retention Credit was designed for small businesses, not large corporations. Originally, the cut off was set at 100 or fewer full-time employees to be able to claim for all wages paid, but it was later raised to 500.
Some businesses may have more than 500 employees, but they may not all count as full-time and are therefore not included in the count. Additionally, employees paid to work fewer hours than their contract or to not work at all are not necessarily included, which could be the difference between qualifying or not. If you are not sure how to proceed, then have BottomLine Concepts evaluate the situation for you.
Forgetting about Tax Liability
If you didn't have a tax liability or suffered a loss, you can claim it as a refundable tax credit through the Employee Retention Credit program.
Wrongly Thinking that Charities and Non-Profits Don't Get Employee Retention Credit
Non-profits and other tax-exempt business operations, including museums, churches, and hospitals, are eligible for these credits. If there are qualified employee wages to account for and other requirements are met, these businesses can benefit greatly from the program. It is certainly worth speaking to an expert, as charities and tax-exempt businesses that were impacted during COVID-19 are often ideal candidates for ERC.
Failing to Provide Proper Documentation
There is no denying how hugely beneficial these tax credits are for all who qualify. A fully refundable credit is not something taken lightly- the IRS is not in the habit of giving away free money. To qualify as an eligible employer and have your claim approved, the documentation and filing must be appropriately handled.
This is a complicated claim- no doubt about it- and detailed proof of eligibility is a must for anyone who hopes to have a successful claim. One of the biggest mistakes made is not taking it seriously and handing in a half-hearted attempt at reporting the wages paid and income earned.
Paperwork is not everyone's thing, and that is fine- that is why BottomLine Concepts exists. We love paperwork and are qualified documentation wizards, so your claim is in good hands with our council and guidance.
Not Getting the Assistance and Advice You Need
All these mistakes are easily avoided in a straightforward step: speaking to someone who knows everything there is to know about these claims, how to submit them, and what you need to be successful. Going it alone is not the best way to do it- especially not when tens or even hundreds of thousands of dollars are on the line.
If a simple phone call could be the difference between struggling through your business's regrowth after a time of trial and having the financial security to jump off from where you were before this all happened, wouldn't you make it? Well, right now, it is.
Claiming Employee Retention Credit with BottomLine Concepts
There is no team better to help you navigate an Employee Retention Credit claim than BottomLine Concepts. The opportunity to recover thousands of dollars worth of wage expenses could be life-saving for your business operations and make all the difference as we finally move out of the shadow of the COVID-19 pandemic.
Applying for this tax credit isn't particularly straightforward, but it is worth it. If you think you may have qualified wages paid at any time during the applicable quarters, you must contact our team and let us help you.
Who is Bottomline Concepts?
BottomLine Concepts is a specialist team dedicated to providing services to any small business trying to claim the Employee Retention Tax Credit. We are a client-focused company that offers risk-free assistance to everyone who needs them- with a strong foundation built on equal opportunity and a better future for everyone.
Our team comprises financial experts with unrivaled knowledge of how the Employee Retention Tax Credit works and what steps to take to ensure the maximum return for our clients. As well as fighting for financial recuperation following one of the hardest times in history for small businesses, we also fight for animal rights and sustainable environmental protection- in the single most challenging moment in history for our planet.
Here are a few businesses how have had success with bottomline concepts:
How Can We Help You?
As we have mentioned already- and cannot stress enough- Employee Retention Tax Credit applications and approvals are complicated. Many companies who may be eligible for the refundable tax credit on qualified wages are missing out because it seems too hard to manage. That is where we come in! BottomLine Concepts takes the lead and manages the process on your behalf. We have done this before, have a track record of success- and can do the same for you.
We help you make sense of the Employee Retention Tax Credit system.
Our team carries out a thorough and detailed eligibility evaluation so we don't miss anything that could help you qualify.
Throughout the process, we assist and advise on how to submit paperwork, documentation, and any other claim-related processes.
We share a detailed analysis of your claim with a comprehensive overview of what qualified wages apply and how much tax credit you could claim.
Whatever questions you have, we can answer. Once we explore your specific claim and eligibility, we can work out every detail that could impact the claim and ensure you are aware of all the circumstances.
In short, we can help you by making the whole process feel a bit more manageable and accessible- and taking you through each step with a steady, expert, guiding hand. Our professional team knows everything there is to know about Employee Retention Credit, and once we analyze your business's claim, you will learn all you need to know to move forward with confidence.
BottomLine concepts is a contingency-based operation, so there is no risk to you if your claim should be unsuccessful.
We provide a comprehensive, end-to-end service with business benefits for you on all fronts.
After following the Employee Retention Tax Credit evolution over the years, we can confidently advise on the specifics and apply them to your claim.
Patience and client-focused service are things we value, and it shows in the way our team member work with employers to help them understand the process.
If there are qualified wages to be found, we will find them. No stone is left unturned in our search for eligibility.
BottomLine Concepts has already helped people claim back everywhere from $100,000 to $6 million in Employee Retention Tax Credit.
Get the Ball Rolling Today and Claim Back what Your Business Is Owed
Don't let the possibility of up to $26,000 per employee worth of refundable tax credit pass you by. The Employee Retention Credit program has already helped countless small businesses recoup costs for wages paid during the pandemic, and it could help you too.
If you are not sure whether or not you qualify as an eligible employer, talk to an expert at BottomLine Concepts. Phone us or send in an inquiry completely free of charge to find out if you have a claim and how we can help you receive maximum credit on qualified wages.
It is time to chase the light at the end of the tunnel and get US businesses back on track. Your small business matters, and Employee Retention Credit is here to help you continue and thrive. Let BottomLine Concepts help you get what you deserve.
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