A Complete Guide to Understanding ERC Eligibility

There are very few businesses that were left untouched by the recent pandemic. Around 25% of small businesses reported losing around half of their pre-pandemic revenue levels. 

These huge losses made it extremely difficult for business owners to navigate and stay open. That’s why the employee retention credit was created. This tax credit allows business owners to recoup some of the costs they incurred while continuing to pay employees despite major drops in revenue and forced mandates. 

But figuring out your ERC eligibility status can be slightly confusing for many businesses. Our guide will cover everything you need to know about your eligibility status. 

Experienced Loss of Revenue — or — Forced Mandates

The first step to determining if you’re ERC eligible is figuring out if your business experienced significant revenue loss or had any governemnt forced mandates.

This loss in revenues could have been caused by  pandemic-related events or it could have just been because of the circumstances in the industry. 

In order to be approved for the credit, this must be well documented. Not just any loss of revenue will do either. You must be able to prove that you’ve had quarter over quarter losses between 20% and 50% or more (depending on the year) from pre-pandemic levels. 

If you experienced forced mandates such as government-issued shutdowns, reduced work hours, and in some cases, forced social distancing requriements. An example of this would be a resturant that had to close every other table as it would put patron within the requried 6 foot distance. 

Before you take the time to move through the rest of the process, it’s a good idea to verify these two business impacts and the related facts. 

Paid Employees Through Designated Time Periods 

It’s important to remember that the employee retention credit was specifically designed to cover losses experienced during the pandemic. All of your losses will have to have occurred within a designated timeframe (Q2 2020 to Q3 2021). 

It’s also helpful to understand when you can apply for ERC as well. Some business owners weren’t aware of this option, especially if they participated in the PPP program. 

Now, business owners are able to retroactively apply for these credits within a specified amount of time. Double-checking all of your dates with the official documents will save you from unnecessary work and trouble. 

Verifiable Financial Documentation 

In order to be approved and paid for your employee retention credit, you have to be able to verify all the information. This is done by presenting a series of documentation including payroll reports, Fianancial Statements, PPP Calculations, etc. The best thing you can do is make sure all of your paperwork is in order before submitting any applications to avoid delays. However, a good ERC Expert can help you know what you need to prepare. 

Everything to Know About ERC Eligibility

Figuring out the best tax strategy for your small business, including ERC eligibility, can be a difficult task. There are so many factors and options to consider. The last thing you want is to miss something that will save you a lot of money in the end. 

This is why it’s so important to work with experts who know exactly what you’ll qualify for. The right tax team will help walk you through the process step by step to ensure you get every deduction you can. 

Our team has studied small business taxes so that we can best help you. If you’re interested in seeing how we can help you, send your application in today! 

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