ERC: 3 Ways to Determine Eligibility

There are still many businesses and nonprofits struggling to recover from the pandemic– some businesses could even be considering a shutdown right now. The Employee Retention Tax Credit (ERC), a refundable and advanceable, tax credit, could bring significant financial relief to both businesses and nonprofit organizations. MP’s HR and payroll experts have been helping hundreds of businesses claim their maximum ERC. These funds (sometimes an ERC could be $1 million or more) could mean the difference between shutting down the business or expansion and reaching new levels of growth.

Unfortunately, organizations often inaccurately assume they don’t qualify for an ERC because they are a nonprofit, received PPP loans, never shut down, or didn’t experience a revenue loss. MP’s HR services experts offer three evaluation approaches for employers to determine if they are eligible to claim an ERC.

1. Loss of Revenue:

One way employers qualify for an ERC is through revenue loss. To qualify retroactively in 2020, employers must show a loss in revenue (by gross receipts, as defined by §6033) by 50% for a calendar quarter as compared with the same quarter in 2019, that has gone down. Employers who demonstrate a revenue loss that meets these standards can claim an ERC until the first day of the quarter post the quarter when their revenue exceeds 80% of the collections for the same time period in 2019.

In 2021, employers eligible for an ERC must prove a 20% loss (by gross receipts) in any quarter(s) of the year as compared to the same quarters of 2019.

To prove eligibility for an ERC, employers may utilize the prior quarter gross receipts. Employers may compare quarters from 2021 to 2020 if they not yet in business at the start of the relevant 2019 quarter.

2. Business Shutdown:

Another way employers demonstrate ERC eligibility is by proving their business experienced a partial or complete shutdown due to a state or federal government order.

3. Qualifying Questions:

Employers that are still unsure if their organization is eligible for an ERC can use these simple qualifying questions. Just one “yes” answer may be enough to receive significant pandemic financial assistance. The questions are organized in four categories: Government Orders, Suppliers and Vendors, and Remote Work, and Restrictions.

Government Orders

1. Were employee hours ever limited by government orders? 

2. Were your employees ever unable to go to work due to the pandemic or government orders? 

3. Were there every any restriction on the use of your organization’s physical space due to government orders, thus affecting its ability to serve customers and clients?  

4. Did any government orders obstruct your business from operating at its maximum capacity?  

Suppliers and Vendors

1. Did pandemic-related supplier chain issues due to government orders ever impact your business or organization’s ability to serve its clients or customer base? 

2. Did your business ever experience a service provider disruption during the pandemic due to government orders? 

Remote Work

1. Did your employees ever need to work remotely due to government orders , resulting in limitations on their performance?  

2. Were your employees ever restricted from working on-premises due to government orders? 

Restrictions

1. Did your business ever need to operate at a lowered capacity during the pandemic due to government orders? 

2. Were your employees ever unable to use your physical workspace or your organization’s physical assets due to government orders ? 

3. Did you need to reduce hours to limit the selling of alcohol due to government orders ? 

4. Did you need to reduce hours to clean and sanitize due to government orders ? 

5. Did your business ever have a limitation on its gatherings, (which affected its operations) due to government orders ? 

6. Was there ever a partial or complete shutdown of your business or organization due to government orders? 

7. Did your clients or customers need to socially distance on your business premises due to government orders? 

8. Were your hours ever limited in any way due to government orders?