COURTESY / KYLE BANFIELD
Kyle Banfield is a major account executive at the human resources firm MP.
June 30, 2021
How to determine if your business qualifies for an Employee Retention Credit
By Kyle Banfield
Pandemic restrictions may be waning, but many businesses and nonprofits are still struggling to overcome their financial challenges. Some businesses are even considering a shutdown.
The Employee Retention Credit (ERC), a refundable and advanceable tax credit, could bring significant financial relief to businesses and nonprofit organizations. Some businesses have claimed ERCs of over $1 million dollars. These funds could mean the difference between a business shutting down or expanding and reaching new levels of growth.
Even organizations that received PPP loans or did not experience a significant loss in revenue are eligible.
Here are three important considerations to help you determine if your business or organization is eligible to claim an ERC.
Loss of revenue
Employers can qualify for an ERC based on revenue loss. To qualify retroactively in 2020, employers needed to show a loss in revenue (by gross receipts) by 50% for a calendar quarter as compared with the same quarter in 2019.
In 2021, employers must demonstrate that they had a 20% loss (by gross receipts) in any quarter(s) of the year as compared to the same quarters of 2019.
Employers may use the prior quarter gross receipts to prove eligibility for an ERC. For example, if an employer were seeking an ERC for the first quarter of 2021, they could compare the fourth quarter of 2020 to the fourth quarter of 2019. Employers may compare quarters from 2021 to 2020 if they weren’t in business at the start of the relevant quarter in 2019.
Business shutdown
An employer that can’t prove the required loss in revenue in 2020 or 2021 can still be eligible to claim an ERC. The employer must demonstrate that their business either had to close its operations partially or fully due to a state or federal government order.
Qualifying questions
For those employers that are still unsure if their business or nonprofit organization is eligible for an ERC, these simple qualifying questions may help. Just one “yes” answer may be enough for an organization to receive significant pandemic financial assistance. The questions are in four categories: government orders, restrictions, suppliers and vendors, and remote work.
Government orders
- Were employee hours ever limited by government orders?
- Were your employees ever unable to go to work due to the pandemic or government orders? Were there ever any restrictions on the use of your organization’s physical space, thus affecting its ability to serve customers and clients?
- Did any government orders obstruct your business from operating at its maximum capacity?
Restrictions
- Did your business ever need to operate at a lowered capacity during the pandemic?
- Were your employees ever unable to use your physical workspace or your organization’s physical assets?
- Did you need to reduce hours to limit the selling of alcohol?
- Did you need to reduce hours to clean and sanitize?
- Did your business ever have a limitation on its gatherings, (which affected its operations)?
- Was there ever a partial or complete shutdown of your business or organization?
- Did your clients or customers need to socially distance on business premises?
- Were your hours ever limited in any way?
- Suppliers and vendors
- Did pandemic-related supplier chain issues ever impact your business or organization’s ability to serve its clients or customer base?
- Did your business ever experience a service provider disruption during the pandemic?
Remote work
- Did your employees ever need to work remotely, resulting in limitations on their performance?
- Were your employees ever restricted from working on-premises?
Most Recent
Most Recent
Anonymous
July 19, 2021
I have a restaurant. It is family active place. They do not come in because children under 12 are not vaccinated and they have opened up mask restrictions. Can I get ECR
Anonymous
June 30, 2021
Very helpful column. Thank you Kyle Banfield and MaineBiz!
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