The Employee Retention Credit (ERC) expired on September 30, 2021 (for all but eligible Recovery Startup Businesses), but employers may still be able to file an amended Form 941, Employer's Quarterly Federal Tax Return, for prior quarters to utilize the program and obtain a significant cash benefit (up to $26,000 per employee during 2020 and 2021). Whether you never understood it, or just missed hearing about it altogether, Frost Law is helping all kinds of employers determine if they qualify for the credit.
What is the ERC?
Introduced in the CARES Act, and intended to incentivize employee retention during the pandemic, the ERC is:
- A refundable payroll tax credit
- Claimed quarterly
- Reducing payroll taxes/producing cash refunds
- Available to both eligible for-profit and not-for-profit employers
How Do You Qualify for the Credit?
First, if your business was affected by a mandated full or partial suspension of business operations 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 would 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. Frost Law utilizes a comprehensive analysis in all situations which 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.
Finally, Recovery Startup Businesses remain eligible for the ERC even in the fourth quarter of 2021. Briefly, a Recovery Startup Business is a business that was started after February 15, 2020, and has gross receipts under $1 million. If you own/operate a Recovery Startup Business—you may still be eligible for ERC through the fourth quarter of 2021!
Frost Law recognizes the unprecedented reach and potential of this credit for employers who retained w-2 employees throughout the pandemic. While many CPA firms and other professionals are missing this credit entirely, or just don’t have the time to dedicate to the nuanced analysis required in each case, Frost Law has devoted significant time and resources to understanding the ERC and working with employers who need this relief. Frost Law’s dedicated team of attorneys, CPAs and financial professionals are excited to see their efforts and results aligning with the Congressional intent driving the ERC – making sure those employers who kept employees on payroll during tough times are rewarded.
Contact Frost Law today for your in-depth, no-cost ERC eligibility analysis. Call or email: info@askfrost.com or 410-671-0021
Learn more in our webinar series sponsored by United Bank here.
