It’s not a secret that the coronavirus pandemic had a massive impact on businesses from 2020 through today. Over 60 percent of American businesses sought help from programs like the Paycheck Protection Program. Another popular government financial program that came from the pandemic was the Employee Retention Credit.
If small business owners want in on the ERC credit, they have to apply and get approved to receive it. The only problem is that it’s not always clear how to qualify for it or what to do if you get denied. Read on to learn how to move forward!
Who Qualifies for the Employee Retention Credit?
The Employee Retention Credit is a program that came out of the CARES Act in 2020. It’s a payroll tax credit for certain qualified wages created to encourage businesses to retain employees during the pandemic rather than laying them off, even if the employees weren’t working.
The ERC credit has been repealed, but employers can still file for it in 2022 as part of their 2020 and 2021 taxes. In order to qualify, your business must have been fully or partially suspended during the pandemic, and you must have experienced a significant decrease in your gross receipts. This means your gross receipts must be less than 50 percent of your 2019 gross receipts.
In 2021, this qualifying percentage of loss was changed, and businesses needed to demonstrate an 80 percent loss of gross receipts compared to 2019.
Why Were You Denied the ERC?
The biggest reason people don’t qualify is that they didn’t suffer a large enough loss during the pandemic. There are several other reasons that lead to a denial, though.
For example, you cannot claim the ERC credit for employees who were retained via the Work Opportunity Tax Credit. You also cannot claim the ERC for wages counted for the credit for paid family and medical leave in section 45S of the Internal Revenue Code. If you employees are relatives, you may also be denied the ERC.
This list is not exhaustive, and there are a lot of small details that can cause a denial.
What Do You Do Next?
There are a couple of things you need to do as a business if you’ve been denied the ERC credit. First, if you had previously qualified and received payments for it in advance, then it’s important to take the time to determine how much money you’ll need to repay the IRS and sort out the due date. Failure to pay it back on time means costly failure to pay penalties.
It’s important to note that you can receive professional help when filing for the Employee Retention Tax Credit. Seasoned professionals know all about the qualifying standards, and they can help you create an application suitable for approval. If you don’t already have a professional on your side, then now is definitely the time to hire one.
Were You Denied the ERC Credit?
The ERC credit is a super popular program among American employers who are struggling to deal with the impact of the pandemic. If you applied for the program on your own and got denied, don’t panic. Instead, consider hiring a professional who can help walk you through the application process and boost your chances of success!
Do you want to learn about more awesome ways to help your business succeed? You’ve come to the right place! Check out the rest of our blog for tons of great tips about small business funding and more!
