ERC Loan Application Process
The ERC loan application process is not necessarily mainly because there isn’t such a thing as an ERC loan. The Employee Retention Credit is a program put out by the government.
The purpose is to help small and mid-sized businesses with less than 500 W-2 employees that were able to retain their employees during the Covid-19 pandemic.
The best part, it’s not an ERC loan, but a refundable tax credit based on previous taxes filed. Unlike the PPP loan, there is no payment and are no restrictions as to how the business uses the money.
Your business is eligible for the tax credits if you meet the criteria discussed further in this article.
Why Employee Retention Credit is Important to Your Business
The pandemic significantly disrupted business operations in 2020 and 2021, causing gross revenues to nosedive suddenly.
This created cash flow problems that prevented businesses from reimbursing their employees and had to lay off many staff members.
The ERC loan was rolled out by the CARES Act to keep employees on the payroll of eligible businesses.
The businesses that did pay their part time and full time employees were forced to pay certain payroll taxes which were filed on their quarterly payroll tax return.
The government understood the hardships this caused and is now offering a refundable tax credit to businesses that qualify.
Although the program has undergone several changes in the following years, the ERC qualifications requirements are relatively straightforward.
The program officially ended on September 30, 2021. Still, businesses can claim the ERC on their 2020 and 2021 tax returns.
The amended filing can happen up to 3 years after the last affected Quarter.
Qualification Requirements for the ERC Funding Program
The ERC tax credits is a payroll taxes credit that is available to an eligible employer that had full or even partial suspension of their operations due to government orders.
Businesses can also qualify if they saw a reduction in gross receipts, claim safe harbor, or the business was affected in any way.
One example would be a restaurant having to spread out the tables for social distancing, forcing them to serve fewer customers.
The qualification requirements for the calendar years 2020 and 2021 are slightly different.
ERC Eligibility Requirements for 2020
Employers can claim the ERC for 2020 if they:
- Had to partially or fully shut down operations during 2020 due to a government order
- Saw a decline in gross receipts by over 50% when compared to the previous year
Businesses can claim a maximum of $10,000 for all calendar quarters up to $26,000 per eligible employee.
For employers with over 100 employees in 2019, the IRS defines qualifying wages as wages paid to employees who did not provide services because operations were partially or fully suspended or because of declining gross receipts.
Employers with less than 100 employees in 2019 can claim qualifying wages for all their employees.
It the business had a PPP loan (Payroll Protection Program) it was not an eligible employer, even with PPP loan forgiveness.
Once again, the Employee Retention Credit is not a loan so there is no worries about ERC loan forgiveness.
ERC Eligibility Requirements for 2021
The rules for 2021 have changed slightly as follows for businesses that experienced:
- A partial or full suspension of business operations due to a governmental order
- A decline in gross receipts for the first, second, and third quarters, where the gross receipts were less than 80% of the gross receipts in the same calendar quarter in 2019
Eligible firms can claim a credit of up to 50% of qualified wages paid to employees from December 1, 2020, until October 1, 2021.
This credit is equivalent to 70% of qualified wages for a maximum of $10,000 per employee for each quarter. In other words, businesses can receive $7,000 per employee per quarter but not to exceed $26,000 per employee.
Why It Shouldn’t Be Referred to as ERC Loan
The ERC is a refundable tax credit paid to qualified employers by the IRS through a check. This amount does not need to be returned to the IRS. In other words, the ERC loan is not a loan or grant program.
Businesses can claim the Employee Retention Credit on an amended 941-X payroll tax return. The deadline for seeking ERC in 2021 is April 15, 2025.
ERC credits for the quarters of 2020, the deadline is April 15, 2024. This gives businesses plenty of time to prepare their application – just make sure not to delay the process because the IRS is constantly revising the rules.
How to Claim the Employee Retention Credit in 2023 – FTCO ERC Can Help
A quick recap shows that the Employee Retention Tax Credit is not a loan but an important tax law that can help US businesses recover from the impact of the COVID-19 pandemic.
It provides eligible businesses with a tax credit of up to $7,000 per employee per quarter and can help businesses retain their employees, cover their payroll expenses more, and improve their financial position.
Eligible businesses should ensure that they understand the criteria for the Employee Retention Credit and take advantage of it for part-time and full-time employees to support their recovery efforts.
Since the ERC is a tax credit rather than a loan, it does not necessitate repayment. Businesses could only apply for the Payroll Protection Program or the Employee Retention Credit in the first stimulus package.
Because of this regulatory change, businesses can now claim both options but need to follow government guidelines.
Is Your Business Considering Claiming the Employee Retention Credit?
We would suggest you seriously consider having professional help with the process. FTCO ERC has helped many businesses get the money they deserve.
We ensure that the job is done right and work on getting you the most significant return without potentially triggering an audit.
Feel free to contact us through our contact form or give us a call. We can help answer any questions, give guidance, and even offer a complimentary Employment Retention Pre-Qualification check. There is no obligation.
Our goal is to help get businesses the money they deserve.