Who is Eligible for Employee Retention Credit?
The Covid-19 pandemic that started back in 2020 has changed nearly every facet of our lives. Our day-to-day activities look different. Schooling looks different, and there is no doubt that the business and economic landscapes have changed dramatically. With worldwide mandatory business closures and supply chain disruptions, it seems that no sector of business and industry was left untouched.
With this massive upheaval in normal operations, numerous businesses were sent scrambling for lifelines to stay afloat. This is especially true for small businesses that do not tend to have the resources to weather such a storm that does not seem to be subsiding any time soon. Seeing the struggles that companies were facing, the federal government intervened with legislation offering the Employee Retention Credit Program or ERC.
The ERC was designed to help give cash flow to small businesses that were affected by pandemic closure orders and supply chain disruptions, thus allowing them to pay their employees even if they were shut down. The most recent version of the ERC program revisions opens up eligibility to far more small businesses than the original version. Let’s take a look at who is now eligible for this Employee Retention Credit.
The first requirement is that a business must have fewer than 500 full-time or full-time equivalent (FTE) employees. Companies with larger payrolls than those are ineligible for the ERC. If your business meets the employee requirement and was in business before February of 2020, the next factor that will be considered is any mandatory shutdowns that were a result of the pandemic. If this was the case, then it is likely that the company will qualify for this credit.
If your business operations were not suspended due to Covid-19 closures, you may still be eligible for the ERC. To determine if this is the case, you will need to dig into your quarterly earnings summary. For the 2021 tax year, a company will be eligible for the ERC if they experienced a 20% or greater decline in the gross receipts from the same quarter in 2019.
You may be wondering what this means for operations that were not around in 2019. There is good news. These startups may qualify for the Employee Retention Credit under the CARES Act. With CARES Act guidelines, eligibility can be examined using data from the calendar quarter immediately preceding the current quarter.
Another positive to the newest version of ERC rules is that if a small business qualifies for the credit in a quarter, they also are eligible to receive this credit in the following quarter regardless of if they meet the eligibility ratios in that quarter.
There is no doubt that the Employee Retention Credit has been the saving grace for many small businesses and their employees, allowing them to keep making payroll and maintaining their operations to the best of their ability.
We also know that applying for this credit and deciphering the eligibility requirements can be a somewhat confusing process. This is why the professional team at Seek Business Capital is ready and waiting to help you and your small business apply for the ERC to get the money you need quickly and efficiently. You don’t have to go it alone. Call us today!