Which Businesses Are Eligible for the ERC?
If you are a small business owner, by now we are sure that you are probably feeling overwhelmed and completely drained. 2020 was an immensely difficult year for companies large and small across the globe, and 2021 hasn’t been a cakewalk either. Pandemic-related closures have rocked the foundations of many small businesses, sadly forcing some to shutter their doors permanently. For those who have stayed afloat, managing operational challenges has been unpredictable at best.
Federal, state, and local mandates and guidance continually evolve. What is permissible one week is no longer allowed the next. Surges come and go, and stability feels like a long-lost memory. The federal government has introduced and passed several acts of legislation designed to help out small business owners including PPP and loan forgiveness, but one of the most helpful has been the Employee Retention Credit or ERC.
Just like everything else during this pandemic, the ERC guidelines can prove to be a bit confusing to navigate, but we hope to clear up some of the confusion regarding which businesses are eligible for this credit. Keep reading to find out.
Although the ERC guidelines are numerous, the relief that it can provide for an ailing small business is well worth the effort. Over the course of the last year, many revisions have been made to the eligibility requirements, making this credit available to more small businesses than ever before. In short, ERC is a refundable tax credit that reimburses employers for specified employment taxes because of pandemic-related financial difficulties.
In order for your business to be eligible for the current 2021 ERC relief, you must employ less than 500 full-time or full-time equivalent employees. If this is you, now you must look at comparing your Q1 earnings from 2021 to your Q1 earnings in 2019. If you have earned less than 80% of what you made in 2019, you should be eligible for ERC.
So, what does eligibility get you? It gets you up to 70% reimbursement on eligible wage expenses up to $10,000 for each of your employees per quarter. That means you could receive up to $28,000 for every full-time staff member over a year. That is quite a big help for many smaller companies who do not tend to have the financial reserves to survive long periods of shutdown without completely laying off their employees.
We should mention that there are a few exceptions to ERC qualifications that you should be aware of:
- Employees with a 50% or greater ownership in the company are ineligible for ERC.
- Employees who are family are ineligible to receive ERC compensation.
- No double-dipping is allowed.
- Wages that are counted toward the Families First Coronavirus Response Act (FFCRA) or PPP credits are not eligible to be counted as ERC allowable wages.
The good news is that the knowledgeable team at Seek Business Capital is extremely well-versed in the ins and outs of ERC eligibility. We are ready to help you through the application process so you can get the financial help you need to keep your business going strong now and into the future.