08 Apr Employee Retention Tax Credit Yields Powerful Opportunity
We have been sharing strategies related to taking advantage of federal and local Disaster Relief Funding opportunities with our followers since coronavirus changed the world as we know it in early 2020. This month, April of 2021, is no different; we have discovered some super powerful opportunities regarding the Employee Retention Tax Credits (ERTC) available from the federal government against 2020 and 2021. Here are some little-known, rarely discussed opportunities that we want to highlight that are reaping thousands of dollars of rewards to many of our clients:
- The ERTC 2020 credit allows a business owner to qualify for up to 50 percent of the employees’ wages OR $5000 per employee of tax credit if the revenue for the business is down by more than 50% in comparison to the same time period in 2019. This is a sizeable opportunity for your business if you meet the criteria. However, even if your company was not down in revenues by 50 percent or more in comparison to 2019, you may still be able to receive the tax credit. A little-known opportunity to qualify for the 2020 ERTC Credit exists if your SUPPLIER was unable to supply your business with materials, due to government-required business shut down. There were so many supply chain disruptions in 2020, often due to US-based manufacturers not being able to keep their production facilities open because of government shutdowns. If your business can prove that you were unable to get materials from a key supplier due to shutdown mandates at your supplier’s facility, you can apply for the 2020 ERTC credit.
- Another way to qualify for the 2020 ERTC credit is if your business was required to be shut down due to government mandates. Again, you don’t have to show that revenue was down by 50 percent or more if you can instead go to your local government business shutdown orders and provide proof that your business was required to be shut down due to local regulations for a portion of the 2020 calendar year.
- A little-known fact regarding the ERTC 2021 qualifications is that the business does NOT need to be experiencing a 20 percent decrease in 2021 revenues in comparison to 2020, they just need to be showing a 20 percent decrease in comparison to 2019 revenues. We have seen many business owners who have been trying to compare revenue numbers between 2021 and 2020, when in actuality, the comparison should be made between 2021 and 2019 revenues.
- You can still apply for ERTC Credits for 2020 and for 2021. If you end up qualifying for the 2020 tax credit, you will literally receive a check instead of the tax credit, since 2020 payroll has already been processed. The same would apply to Quarter 1 of 2021; the quarter is over and the payroll taxes have been filed for this quarter so even if you are just receiving the ERTC credit now, you can get a check for Quarter 1 of 2021 payroll that has been processed.
- In Quarter 2 of 2021 and beyond, you would first use the ERTC as a TAX CREDIT, as it was intended. If you get more tax credit than you have in payroll expenses, then you will apply at the end of the quarter to receive the remaining tax credit in check form rather than in tax credit.
ERTC can reap substantial rewards for your business! It’s important that you carefully consider all the opportunities you have to take advantage of it. Here is a case study of one our Reconciled Solutions clients who has been hit hard by the pandemic.
- 2020 Revenue in comparison to 2019 Revenue was down by 19% but they qualified for first round PPP funding in April of 2020 and used the 8-week calculation to spend the money and apply for forgiveness.
- By the end of Quarter 2 of 2020, the PPP Round One was already depleted. Therefore, they were able to apply for and receive an ERTC credit for Quarters 3 and 4, because they were down by around 50% in comparison to 2019.
- When the government announced more emergency relief funding, they applied for second round PPP funding and received it in early February 2021. They have 24 weeks in which to utilize this money, which will carry them into July 2021.
- They have simultaneously applied for ERTC for 2021 for Q1, knowing that they can compare their financials to Quarter 1 of 2019. They will be able to use both the PPP Round 2 funding and the ERTC for 2021 in efforts to get their business back on track after it had grinded to a near halt in 2020.
If you would like Reconciled Solutions to look at the opportunities for ERTC Qualification in your business, please reach out to us at email@example.com. Here are some ways we can support you:
- Determination of Qualification for the Employee Retention Credit Opportunity ($99 fee)
- Employee Retention Credit Application Completion and Support ($499 per quarter)
- PPP Loan Forgiveness Application and Loan Forgiveness Support ($999 or 1% of the loan if greater than $100,000)