The last couple of years hit a lot of small businesses hard. Are you still hoping to get COVID-19 relief funds?
If you’re still searching for information about PPP (Paycheck Protection Program) loans, you’ll find that they’ve come to an end. However, the ERC (Employee Retention Credit) is an alternative!
Not many eligible small businesses have claimed the ERC because they haven’t heard about it or worry that they’ll be on the hook for claims made incorrectly. If a business contacts you and claims they can collect the ERC for you without knowing details of your business’s performance, you should be skeptical.
CSI Accounting & Payroll has helped many of our eligible clients claim the ERC, so we’re able to walk you through the following:
- Are you eligible for the ERC?
- Is there different eligibility for PPP loans?
- Can you claim the ERC if you already got PPP loans?
- How do you claim the ERC?
Who is Eligible For the ERC?
To get an idea of if you may be eligible for the ERC, check out the following criteria.
2020 ERC Eligibility
- You were in business before February 16, 2020.
- You have 500 or fewer W-2 employees.
- A quarter in 2020 has sales down by at least 50% of the corresponding quarter's in 2019 OR your business was subject to a full or partial shutdown order in this quarter, and you paid out wages to your employees while it was shut down.
Q1 & Q2 2021 ERC Eligibility
- You were in business before February 16, 2020.
- You have 500 or fewer W-2 employees.
- Q1 and/or Q2 2021 sales are less than 80% of the corresponding quarter's in 2019 OR your business was subject to a full or partial shutdown order in this quarter, and you paid out wages to your employees while it was shut down.
Q3 2021 ERC Eligibility
- You have 500 or fewer W-2 employees.
- You were in business before February 16, 2020 OR you have under $1 million in sales.
- Q1 and/or Q2 2021 have sales down by at least 90% of the corresponding quarter's in 2019 OR Q1 and/or Q2 2021 sales are less than 80% of the corresponding quarter's in 2019 OR your business was subject to a full or partial shutdown order in this quarter, and you paid out wages to your employees while it was shut down.
Q4 2021 ERC Eligibility
- You have 500 or fewer W-2 employees.
- You were not in business before February 16, 2020.
- You have under $1 million in sales.
Is ERC Eligibility Different Than PPP Eligibility?
Even though the PPP loans are done being distributed as of May 31, 2021, the eligibility for them was only slightly different than the eligibility for the ERC.
While the ERC started out more difficult to meet eligibility, it eventually became easier to qualify. The PPP was the opposite; it began easier to meet eligibility and later became more difficult to qualify.
PPP 1 (First Draw)
The first round of PPP loans had almost no criteria, so long as you were a small business of under 500 employees and were paying employees by February 15, 2020. It would grant you funds that would either need to be paid back or spent on eligible expenses.
PPP 2 (Second Draw)
For the second round, you were eligible if you had used the full amount of the First Draw PPP loan, had under 300 employees, and could show a reduction in revenues of at least 25 percent between 2019 and 2020 based on quarterly amounts.
Can You Claim the ERC if You Had PPP Loans?
We like to refer to this analogy; you can own both a pool and a hot tub, but you can’t be in both at the same time.
Business owners who received PPP loans and had them forgiven can also get the ERC, but the money that was used in the PPP loan forgiveness can’t also be applied to claiming the ERC.
Some wages don’t qualify for the ERC, such as wages over $10,000 paid to any one employee or wages paid to the owner or a family member, but these wages can be used in PPP loan forgiveness.
How Do You Claim the ERC?
Have a reputable company file for the ERC for you! Here’s why: you may be held liable for incorrect claims. We foresee small businesses going through audits and having to pay back incorrectly distributed credits - plus penalties and interest.
As we mentioned before, you should be wary of baseless claims from shady companies who say they can get you the ERC if they know nothing about your business’s performance during COVID. The IRS will accept returns from anybody - even if they’re not your agent - as long as they know your EIN and name. We have seen other companies take shortcuts in submitting information, causing issues for small businesses.
You should also avoid trying to do it yourself if you aren’t confident in the information you’re submitting.
So, what makes a company reputable for helping small businesses claim the ERC? Documentation and strategy.
At CSI Accounting & Payroll, we use a detailed spreadsheet to categorize all of your relevant information, and we hold onto this information in case it is ever needed for an audit. We also use it to strategize with every dollar spent, maximizing what you can receive in COVID relief funds. This information is shared with you; we’ll never keep you in the dark or make promises that we can’t fulfill!
Stay in the Loop of COVID Relief Funds
At CSI Accounting & Payroll, we stay on top of the changes in COVID relief efforts in order to help our clients through this difficult time. Relief money means anything from recovering from a financial loss to helping your business keep its doors open!
Even after the ERC has come to a close, we are dedicated to helping eligible small businesses claim their credits for previous quarters.
Not to mention, coming on board as a monthly accounting client has tons of benefits over just annual tax accounting or even hiring an in-house accountant. To learn more, click the button below for a free consultation. Let's examine your situation to see if we can be a good fit for each other!
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