Business Owners Still Can Receive ERC Funding
If you are a business owner and have employees, you probably have experienced numerous challenges during the pandemic. You might have even applied and received the PPP loan that the government was offering. However, did you know there is another program that you can apply for that will give you even more money and has fewer restrictions than PPP did?
If not, you are among many businesses that are just discovering the ERC program. ERC is an acronym for Employee Retention Credit and it is a payroll credit that was offered by the IRS for 2020 and the first three quarters of 2021, also known as the Covid-19 pandemic years.
The ERC is available for any business that has W2 employees (not counting the owner) that was affected by the government shutdowns. There are many ways to qualify for the ERC, which we will discuss below, and if you do, your business would be eligible for up to $26,000 per employee as a non-refundable payroll tax credit. Although you would have to deduct that payroll amount received on your business tax return, a non-refundable tax credit is dollar for dollar so your business would come out way ahead.
Unlike the PPP loan which was a loan, that if not forgiven would need to have been paid back, there are no restrictions on how you spend the ERC monies received. You can spend it on rent or payroll just like PPP, or in this case with ERC, you can also spend it on inventory, working capital, expansion, equipment, upgrades, etc. It truly is the better option compared to PPP.
The ERC credit has also been around since 2020 but at the time, your business could not qualify for both PPP and ERC. The business had to make a choice, and in most cases, businesses chose the PPP for the ease of applying and that it was probably the only program they knew about at the time. However, due to some changes made by the government, businesses can now receive both. So even though you received PPP, you can now receive ERC, too. Isn’t that great news?
Here are the two ways that your business would qualify for the ERC money:
- a full or partial suspension of business operations due to government orders enacted in response to the COVID-19 pandemic (the “Government Orders Test”), OR
- a significant decline in gross receipts (the “Gross Receipts Test”).
As you can see almost every business would qualify. Common misconceptions that business owners have regarding whether they qualify or not are not only that they think they had received PPP, they are no longer eligible for both as addressed in the above paragraph, but also the following:
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· We never had to shut our doors
· We are a non-profit and only for-profits qualify
· We are not an essential business and only essential businesses can qualify
· We made more money annually from 2019 to 2020 to 2021
· We were profitable
· We did not have enough employees
· We started our business after Feb 2020
· Our business had to close permanently
· It is too late as the deadline has passed
If you fall into any of the above and you think you do not qualify or it is too late, you have probably been given poor advice. You most likely do. There is still time based on the ability to amend the 941 retroactively for three years. You just need to reach out to a company that specializes in ERC because many accountants do not understand and/or have not kept up with the new details of the ERC program.
In conclusion, your business probably will qualify for ERC funding. It is always good when you can add to your bottom line and in this case, it is a lot easier than you would think. Don’t you think it is time to look deeper into this and reach out to an ERC funding Specialist? You will be happy you did when that check arrives.
