Here’s What You Need to Know About the Changes to the ERC Tax Credit

Here’s What You Need to Know About the Changes to the ERC Tax Credit

Running a business in a post-Covid world is no joke, but tools like the ERC tax credit can provide much-needed relief for business owners. 

Now, we get it. Government programs can feel incredibly intimidating. But we’re confident this one is well worth your time and energy. With some recent changes to the program, you’ll want to take a closer look to see if it’s something you’re eligible for.

We understand that your top priority is taking care of your employees. This program has proven to be a life saver for eligible business owners who were negatively impacted by Covid-19. 

Without any further ado, let’s dive into the ERC program and its recent changes!

What is the ERC Tax Credit, and How Has It Changed?

The ERC tax credit was created to help business owners with employee retention in the wake of the coronavirus. Seemingly overnight, businesses found themselves in dire straights. The ERC program is a grant that allows companies to receive up to $26,000 per employee to help keep them on the payroll.

To get this grant when it was first put in place, you had to prove that the coronavirus negatively impacted your business. This could have happened in one of two ways:

  1. Your business had to be shut down in 2020 or 2021, whether partially or completely.
  2. Your gross receipt amount had a decrease that COVID-19 impacted.

You need to know that you can now file retroactively for this grant so long as you meet the requirements. Keep in mind that this is for businesses impacted between March 12, 2020, and December 31, 2020.

Over time, there have been many ERC changes. The supply chain shortage issue has been one of the causes of these changes. For example, perhaps you’re a plumber and don’t have a storefront that would shut down due to COVID-19.

However, you could need help getting the necessary supplies to complete your jobs because of the supply chain shortage. If this applies to you, you could now be eligible for the ERC tax credit.

How Does the ERC Program Work?

To apply for the ERC tax credit, you’ll need to start with some paperwork. You can fill out one of the following:

  • Form 941-X
  • Adjusted Employer’s Quarterly Federal Tax Return
  • Claim for Refund

There are also a few quizzes available online to help you determine if you qualify for the ERC, as well as online assistance

If you previously applied and were not accepted, try again! With the recent ERC change, your business may qualify now, and you could take advantage of the ERC tax credit.

ERC Credit Frequently Asked Questions

Q: How long does it take to receive the funds?
A: On average, it typically takes six to ten months to receive these funds, so keep that in mind when going through this process.

Q: Can I apply for the ERC tax credit if I took advantage of the PPP loan?

A: The answer is yes! You can still apply for the ERC tax credit if you received a PPP loan. The time frame of your PPP loan is removed from the credit amount you may qualify for.

Q: How do I prove gross receipts?
A: All you need to do is add up your sales, then subtract the cost of what was sold and the sales returned. This will get you your total income.

Q: Does the ERC credit have to be paid back?
A: No. Look at the ERC tax credit as a reimbursement. This isn’t free money to go and spend on some high-tech new gadgets for your business; this is intended to keep your employees on the payroll. It’s not something you’ll ever have to pay back, making this a significant stress reliever!

Q: Can an owner’s salary be included in the ERC?

A: It depends. One example is if the owner has less than 50% ownership of the company, they may claim a portion of the credit. However, if two or more company owners at less than 50% ownership are related, they cannot claim any of the credit.

This is one of the reasons we highly recommend seeking the help of an advisory team to ensure you are getting everything set up the right way with your ERC tax credit.

Q: Does receiving the ERC impact past tax filings?

A: Yes. If you receive the credit, you will need to amend your tax filings for the year(s) impacted. For example, if you receive $20k for the 2020 tax year and originally claimed $200k in wage expense on your 2020 taxes, you will need to amend to show $180k in wage expense instead. The $20k credit offsets $20k in wage expenses. This would apply to both 2020 and 2021 for any credit received.

Revity’s ERC Tax Credit Experience

When the coronavirus first hit, we took advantage of a number of government programs, including the PPP loan and the EIDL. When the ERC program came into the picture, we went to a company that could help us look into it, but we couldn’t use it because the only qualification was having a loss of revenue, which did not apply to us.

Recently, someone came to me with the update that the requirements had changed to include those impacted by supply chain shortages. That had a significant impact on our clients, which in turn affected us.

All of this is to say that if you recently looked into the ERC tax credit and were ineligible, we recommend taking another look! With the recent ERC change, your business may now be eligible for this aid. Making sure that our employees are taken care of is our top priority, and this played a huge part in that. 

Make Sure Your Business Is Taken Care Of

As a business owner, we understand that you wear many hats and juggle many responsibilities. Employee satisfaction is an understandably high priority, and we know that programs like the ERC tax credit can go a long way in helping your employees feel secure and taken care of.

Whether it’s getting you up-to-date info on helpful aid or keeping you in the loop on the latest and greatest in digital marketing, Revity has got you covered. If you feel that the ERC tax credit is something your company could benefit from, reach out to a professional advisory team to get things started! 

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