If your small company was beaten during the pandemic? And you No Obtain an employee retention loan, or ERC, reimbursement? You should know two things. First, you can still request ERC refunds. Second, ERC’s final deadline is approaching. April 15, 2025 is the real date.
But allow me to deepen the details here to know if your company described. And then, he knows what his company should do to obtain any reimbursement he has lost. A comment here too: the reimbursements become great fast. If you described, you are probably talking about tens or even hundreds of thousands of reimbursements.
First some background on the ERC
The Law of Help, Aid and Economic Security of Coronavirus (Care Law), promulgated in March 2020, provided several help and employee packages. The main objectives were to keep companies afloat and prevent employee permits.
Initially, employers had to choose between two programs, the payment check protection program or employers’ retention credits. I could not participate in both.
The PPP program generally provided more money to business owners and is not surprising, it became the most popular option.
However, in December 2020, Congress approved the consolidated assignments law (Fall). And the CAA allowed companies to participate in both the PPP and the ERC. Fiscal professionals and employers then rushed to learn about the ERC program in early 2021. And as we all learned, there were serious help money available for qualified employers.
One last thing to know in advance. Employers potentially obtained ERC funds, or employee withholding credit reimbursements, for salaries paid in 2020 and 2021. But the ERC deadline for reimbursements based on 2020 wages ended approximately about a year ago. What I am talking about here are ERC reimbursements for salaries of 2021. But that’s fine. That’s where the great money is.
How to qualify for ERC?
To qualify for the ERC, companies must generally comply with one of the three criteria:
- Significant decrease in gross receipts, or
- Complete or partial suspension of operations due to a government closure order, or
- Start a new trade or business after February 15, 2020 and before the end of 2021.
From the perspective of a professional (and based on experience with many ERC claims), the qualification through a significant decrease in gross receipts is usually easier to corroborate and demonstrate to the IRS. By 2021, an employer needed a decrease in More than 20% in gross receipts compared to the same quarter in 2019.
Government’s closing orders, the second way to qualify, introduce nuances that can complicate qualification and implementation. If you are interested, you can read more about ERC and government closure orders here. But you probably want to know that much of ERC fraud seems to have involved employers qualified by all government orders.
The third way to qualify is to start a new trade or business. To qualify for an ERC reimbursement based on starting a new trade or business, it must be a small company with average gross receipts for three years before $ 1,000,000 or less. This income limit analyzes the total income of all its businesses. And you get the ERC refund based on salaries paid in any of the businesses.
Qualified salaries for ERC
Not all salaries qualify for employee retention credits. Some do it. Some do not.
Qualified salaries for ERC in 2021 include the following:
- FICA TAX SUBJECT SALARIES
- Certain expenses of the health plan assignable to wages
- Employers had to have 500 or less employees
Unqualified salaries for ERC include:
- Salaries used for PPP
- More than 50% of salaries of the owner
- More than 50% of the salaries of owners’ family members (spouse, children, grandchildren, parents, brothers, in -laws, etc.)
How is ERC calculated?
The ERC 2021 formula works differently depending on credit.
If it qualifies based on a substantial decrease in gross receipts or a government order, the ERC is equivalent to 70% of qualified wages, up to $ 10,000 per employee by quarter for the first, second and third quarter of 2021.
Example: Suppose in 2021 has three employees who earn $ 12,000 each quarter throughout the year. The wages qualified in this case equals $ 10,000 per employee per quarter for quarter 1, quarter 2 and quarter 3. The ERC in this case is equivalent to $ 10,000 × 70% × 3 employees or $ 21,000 per quarter. Then $ 63,000 in total.
The retention credit of starting commercial employees only applies to the third and fourth quarter of 2021. And the retention credit of commercial employees of initiate exceeds $ 50,000 per quarter.
Example: A small construction company enjoys approximately $ 800,000 of the average annual gross receipts. The owner invests in a rental property at the end of 2020 (therefore, a new trade or business). The aggregate business does not qualify for ERC reimbursements on the basis of a substantial decrease in gross receipts or a government closure order. But qualifies because a new business began: rental property. Let’s say that the construction company used ten employees earning $ 12,000 each in quarter 3 and the fourth of 4 of 2021. The ERC in this case is equal to that of $ 10,000 x 70% x 10 employees, or $ 70,000 for quarter 3 and $ 70,000 again for quarter 4., or $ 50,000 per quarter. In this case, the real credit is equivalent to $ 50,000 per quarter for the third and fourth quarter, or $ 100,000 in total
ERC’s deadline depends on the year
The deadline for amending returns and claiming reimbursement depends on the year.
For ERC claims of 2020, ERC’s deadline was on April 15, 2024. Consequently, employers still cannot make claims based on 2020 wages.
However, for 2021 ERC claims, ERC’s deadline is April 15, 2025. Therefore, employers can make claims based on salaries of 2021.
Therefore, if a small company operated in 2021, he had employees and never took advantage of the ERC program, communicate with his CPA or tax coach now. Potentially, it has great ERC refund claims that will expire shortly.
In addition, if a new trade or business began in 2020 or 2021, consult with your CPA or Fiscal Advisor. Many small businesses will also qualify for ERC reimbursements based on this less known method.
Advice: If your fiscal advisor could not help you? Or if you are a tax professional who did not prepare to provide this service? We will be happy to talk about giving you help or your client. The ERC refund program has restarted. You must have time to request before the deadline. Contact us here: Nelson CPA consultation form.
Two final caution words in ERC claims
First, carefully examine anyone who participates for ERC’s work. Unfortunately, the program has been exploited by some (many?) “Mills” ERC not qualified that have prepared allegedly fraudulent claims, often leading to significant consequences for companies. In addition, if you think you may have been a victim of ERC fraud, it addresses the problem immediately. (IRS has a voluntary dissemination program that allows companies to rectify inappropriate claims and potentially mitigate fines. You can find more information about this process in the IRS voluntary dissemination program website.
But another precaution or suggestion: no No Request ERC reimbursements if legitimately qualifies. The ERC has provided financial relief that changes life for many companies. The window to claim these credits is still open. Therefore, do not miss the opportunity to present the presentation before the ERC deadline of April 15, 2025.
Other resources
The rules to determine if it had a substantial decrease in the gross receipts provide more flexibility and margin of maneuver that I describe in the previous paragraphs. This blog post offers more details: 16 ways to qualify for employee retention credits.
More information on the retention credit of Commercial Employees of Starting appears here: Retention credit of Commercial Employees of Start and here: The unexpected gain of retention credit of real estate employees of $ 100,000.
Many houses of worship described for employee retention credits. If you participate in a community of faith where your group was affected by government closure orders, you may want to investigate this most specialized situation. This blog post provides more details about what happened in the state of Washington and should also be applicable to many other states: the houses of worship of the state of Washington, all qualify for employee retention credits.
#April #approaching #ERC #deadline
