The Employee Retention Credits (ERC)以可退还的税收抵免的形式向在COVID-19大流行期间保留员工工资和/或支付健康计划费用的企业提供救济. The ERC tax credit, also known as ERTC, is still getting a lot of attention in the news media these days. Also, 许多公司都在电视和互联网上做广告，说你仍然可以获得信用, even if you didn’t have a drop in revenues.

What is the Employee Retention Credit (ERC)?

ERC是一项可退还的税收抵免，旨在激励企业在COVID-19大流行造成的挑战时期保留员工的工资. Here’s a more detailed look at the credit components of the employee retention program:

  1. Nature of the Credit: The ERC is a refundable tax credit, meaning that if the amount of the credit exceeds the amount of payroll taxes owed, the excess is refunded to the business. This feature makes the ERC particularly valuable as it can provide actual cash to businesses, rather than just reducing the amount of taxes owed.
  2. Application Against Payroll Taxes: The credit is applied against payroll taxes, specifically on the quarterly Form 941/941-X. Form 941 is the Employer’s Quarterly Federal Tax Return, used to report income taxes, social security tax, or Medicare tax withheld from employee’s paychecks. Form 941-X is used for making corrections to previously filed Form 941.
  3. Eligibility Period: The ERC was available for wages paid up to September 30, 2021. This means that any wages paid after this date are not eligible for the credit.
  4. Filing for the Credit: Businesses that wish to claim the ERC for eligible wages can do so by filing amended Forms 941-X. 这对于那些在符合条件期间可能没有申请抵免但在事实发生后才意识到自己符合条件的企业尤为重要.
  5. Deadline for Claiming the ERC: Generally, 在符合资格的期限结束后，企业有三年的时间提交修改后的申报表并申请ERC. 这为企业提供了一个评估其资格并利用信贷的机会窗口，即使在当前的中断期过去之后.

ERC是政府更广泛努力的一部分，旨在通过支持企业并鼓励它们在封锁带来的挑战下留住员工，减轻COVID-19大流行对经济的影响, reduced consumer spending, and other pandemic-related disruptions.

Unlocking the ERC: Strategies for Navigating Revenue Declines and Regulatory Challenges

The ERC is available for all four quarters of 2020 and the first three quarters of 2021. Eligibility can be happen in one of two ways.

Revenue Decrease

第一种方式是，与2019年相应季度相比，上述七个季度的收入是否有所下降. For 2020, the revenue decrease criteria is 50 percent of the corresponding 2019 quarterly revenues. For 2021, it is a 20 percent decrease versus 2019. In addition, if you qualify for a particular quarter, you may qualify for a previous quarter even if that quarter itself doesn’t qualify. This is because of “lookback” provisions in the law. Bottom line – If you qualify under the revenue drop criteria, 那么提交修改后的工资税申报表(表格941)来申请抵免就相当容易了, and we can help you with this.

Facts and Circumstances

I call the second way to claim the ERC a “facts and circumstances” approach. If you did not have the revenue decreases as noted above, the second way to qualify is using this approach. 如果你能证明与COVID相关的政府命令对你的业务产生了不利影响, 那么你可能也有资格获得ERC——比如因与COVID相关的供应链问题而中断，或者因为政府让你的员工呆在家里. This approach is somewhat nebulous because you have to build the case (e.g. 在某种类型的报告中)概述中断是什么以及它们如何对您的业务产生负面影响. The report doesn’t have to be submitted to the IRS, but needs to be available if they request proof that you’re eligible for the credit.

周围有一些公司正在帮助建立“事实和环境”方法的案例. Our firm does not do this. If you’re interested in this approach, there are some companies we’re familiar with, or we’d be glad to help you evaluate any companies you might have been referred to. There’s obviously risk to this approach, 但只要你能证明你受到了政府命令的伤害，这就是合法的.

While a third party company might help you build a “facts and circumstances” type case for the ERC, the risk is all with you. Some of the reports we’ve seen to support this approach seem comprehensive and compelling. Others seem flimsy and may put you at significant risk for attack if you’re audited by the IRS. Many of these ERC consultants say they provide “audit support”, but they don’t guarantee that you’ll win. Also, since the ERC audit period is up to five years, you need to evaluate whether you think the company you used will be in business down the road.

Here is another significant risk. The wages used to claim the ERC are not deductible for income tax purposes. The statute of limitations for income tax purposes is three years. What happens if the IRS audits your ERC and disallows it five years from now? Not only would you have to pay back the ERC (likely with interest and possible penalties), 但是这样你就不能修改你的所得税申报表来申请工资扣除了，因为它已经超过了三年的法定时效. You could lose both the ERC and the tax deduction in that situation.

如果你有一个“事实和环境”方法的案例，一定要评估这个机会.  However, be careful if it is something that seems too good to be true. As always, we’re available to talk through your specific ERC situation and provide advice if requested.

Top Considerations for ERC Eligibility

Businesses can be eligible in two ways:

  1. Your business was partially or fully suspended due to a government order limiting commerce, travel, or group meetings related to COVID-19.
  2. Your business experienced a significant decline in gross receipts, as defined below.

If your business experienced a significant decline in gross receipts, you may be eligible for the entire applicable quarter and potentially the following quarter.

An employer is considered to have experienced a decline in revenue if:

  • 与2019年同一日历季度相比，2020年日历季度的总收入不到50%.
  • 与2019年同一日历季度相比，2021年日历季度的总收入不到20%.

Example: In 2021, 与2019年同期相比，一家雇主第一季度和第二季度的总收入下降了20%.The employer qualifies for ERC and could receive up to $7,000 per employee for Q1 and Q2. Additionally, eligibility for the credit ends the quarter after qualification. Therefore, the employer would also be able to take advantage of ERC in Q3 as well. Note that the credit may be reduced if the employer also received PPP funds.

If my business received a PPP loan, is it eligible for the ERC?

The ERC was introduced as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to incentivize employers who keep workers on payroll during the pandemic by offering a refundable tax credit against employment taxes. Initially, a business that received a PPP loan was not eligible for the ERC.

Since, the enactment of the Consolidated Appropriations Act, 2021 (CAA) in December 2020, PPP recipients can claim the ERC retroactive to March 13, 2020, on qualified wages that are not paid for with forgiven PPP loans. If you are a PPP loan recipient, you may now be eligible for this tax credit with this change.

Changes to the Employee Retention Credit Offers New Opportunities for Employers

The ERC originally had a rate of 50 percent on qualified wages, and with the new changes, that ERC rate was increased to 70 percent for the first two quarters of 2021. The changes also increased the limit on per employee creditable wages from $10,000 for the year for 2020 to $10,000 for each eligible quarter for 2021.

In the original guidance, it was required for employers’ gross receipts to have experienced a 50 percent YoY decline, and now that has been adjusted to 20 percent, making more employers eligible. Companies, tax-exempt organizations, colleges and universities, 提供医疗或医院护理的实体，如果其总收入与2019年同一日历季度的总收入相比下降20%以上，现在有权在2021年享受ERC福利. 在确定相关的合格工资基数时，新的指导方针还将全职等效雇员的数量从100人增加到500人.

Navigating the Updated Employee Retention Credit for 2021

Employee Retention Credit for Quarters Beginning after December 31, 2020

“As a result of the new legislation, 在12月31日之后，符合条件的雇主可以申请退税抵免，抵免额相当于雇主支付给雇员的合格工资的70%, 2020, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021.”1

Use these steps to determine if your company is eligible for the ERC under the new guidelines.

  • Step 1: Did the business have an Eligible Quarter?
    • The business was fully or partially suspended by the government.
    • The business had a 20% reduction in gross receipts as compared to same quarter in 2019. If same quarter 2019 didn’t exist, use 2020.
  • Step 2: What is the Number of Full Time Equivalent Employees
    • If the business has fewer than 500 FTEs, all wages paid qualify.
      • Added: Credit can be taken in Advance = to 70% average paid by employer in 2019
    • If the business has more than 500 FTEs, only wages paid for not providing service qualify (wages paid not to work).
  • Step 3: Determine Qualified Wages (Max $10,000 qualified wages per employee per Quarter = $7,000 credit per employee per quarter)
    • Make election to treat wages plus healthcare costs as first coming out of new PPP.
    • Excess wages & 医疗保健费用符合ERC上限，为每名员工工资的10,000美元x 70%(按季度确定).

Added: The rule preventing inflating wages in an eligible quarter was scratched. Employer can pay bonuses to employees to reach cap for quarter.

Employee Retention Credit for the Period March 12, 2020 through December 31, 2020

“Prior to the Relief Act amendments, 《明升体育app下载》第2301(j)条规定，根据《明升体育app下载》第7(a)条第(36)段获得担保贷款的合格雇主.S.C. 636(a)), 根据《明升体育app下载》第1102条(工资保护计划贷款或公私合营贷款)的规定，没有资格获得员工保留信贷. 《明升体育app下载》第206条修订了《明升app》第2301条，允许获得公私合作贷款的雇主有资格根据《明升app》第2301条，通过取消《明升app》第2301(j)条，申请雇员保留抵免, effective retroactive to the original effective date of the CARES Act.”2

To see if your business can claim a refund of up to $5,000 per employee, follow these steps.

  • Step 1: Did business have an Eligible Quarter?
    • The business was fully or partially suspended by the government.
    • 50% reduction in gross receipts as compared to same quarter in 2019; continue to qualify until receipts back to 80% of same quarter 2019.
  • Step 2: Number of Full Time Equivalent Employees
    • If less than 100 FTEs, all wages paid qualify.
    • If more than 100 FTEs, only wages paid for not providing service qualify (wages paid not to work).
  • Step 3: Determine Qualified Wages (Max $10,000 qualified wages per employee = $5,000 credit per employee)
    • Make election to treat Wages plus Healthcare Costs as first coming out of PPP.
    • Excess wages & healthcare costs qualify for ERC cap at $10,000 per employee of wages x 50% (determined by quarter).

If you received a PPP loan or your gross receipts experienced 20 percent or greater YoY loss, you may now have additional tax credits available to you. Please contact us to evaluate your situation.

Content provided by LBMC tax professionals.

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