ERC for Tech Companies
Tech companies who met the requirements and provided qualified salaries throughout the COVID-19 pandemic may be entitled to the Employee Retention Credit. The ERC now provides a fully refundable tax credit to qualified tech firms that pay employees qualified wages after March 12, 2020, but before January 1, 2021, thanks to the CARES Act. If you are a technology employer who was impacted by COVID-19, we can assist you to maximize the Employee Retention Credit. Benefits of up to $26,000 per employee are available to businesses that have been affected.
ERC Qualifications for Tech Companies
To qualify for the ERC in any calendar quarter, tech companies must meet one of the following criteria:
Operational restrictions imposed by COVID-19 on commerce, travel, and group gatherings resulted in a full or partial suspension of operations at your tech business.
The tech company’s revenue receipts for the calendar quarter decreased drastically in comparison to 2019. The quarter’s gross receipts decreased by more than 50% from the corresponding quarter in 2019, especially for 2020. The eligibility for the credit is still in effect through the 2020 quarter in which gross receipts surpass 80% of the equivalent quarter in 2019.
Instead of a 50% drop, tech firms will only need to see a 20% drop in gross receipts for the same calendar quarter in 2021. Employers have access to a safe harbor that allows them to compare eligibility to gross receipts from prior quarters to the same quarter in 2019.
PPP Loan
Can tech companies use the Employee Retention Credit if they receive a PPP loan? They can. As was already stated, one of the best features of the new law is that it enables taxpayers to submit ERC claims as well as apply for PPP loans. Technology businesses in need of cash infusions in 2020 more frequently turned to PPP loans as a source of funding rather than the ERC because the CARES Act did not initially authorize this overlap. The new law extends the deadline for PPP loans and ERC claims to March 12, 2020. As a result, companies that received PPP loans in 2020 (or who will receive new loans in 2021) can now research potential ERC credits for 2020 and 2021.
