There are too many businesses that have been financially impacted by the COVID-19 pandemic since the last 2 years. As there was no federal program that could help these businesses to make up for their loss, the Employee Retention Credit (ERC) was there to offer considerable amount of relief.
This is a program that was introduced under the CARES (Coronavirus Aid, Relief, and Economic Security Act) to offer an incentive to the businesses that qualified for this financial aid. You may click here to learn more on what the employee retention credit is or keep reading for the to know who qualifies for this credit.
Who qualifies for Employee Retention Credit?
If you are still confused about whether or not you are an employer who can qualify for this credit, here’s something you should know. there are are practically two ways in which an employer can become eligible for ERC.
Firstly, your business should have a significant decline in revenue for any quarter in 2020 and 2021. Secondly if your business had to be partially or fully suspended under Federal Government orders, you may qualify for the ERC.
The extent to which your business revenue has declined needs to be calculated and this calculation process is different from 2020 and 2021. In case of 2020, the decline in revenue should be 50% as against the revenue for the same quarter in 2019. On the contrary, for the year 2021, the decline in revenue should be 20% for any quarter as against the same quarter in 2019.
What are the details required to decide your qualification?
Here is the list of documents and information that you may need to determine whether or not you qualify for ERC.
- Payroll tax returns for a quarter
- Summary of quarterly revenue
- Information on employees and location of business operation
- Detailed information of wages used for Paycheck Protection Program
- Summary of lines of business, like services products and business lines
- Detail of the wages required to be paid to employees for the time they didn’t spend in working
In order to minimise the challenges of the claim process of ERC, employers and business owners need to clearly understand the qualification process of ERC. You need to keep appropriate documents ready if you want to meet all compliance requirements. If needed, an employer can also outsource the entire process to minimise errors and save time.