The Employee Retention Credit (ERC) is a valuable tax credit that can help businesses reduce tax liability. However, navigating the complex ERC eligibility requirements can be challenging, especially for small business owners who may need more knowledge. This blog post will explore what you need to know to navigate ERC eligibility.
Eligibility Requirements
To be eligible for the ERC, businesses must meet certain requirements. Specifically, eligible employers must have experienced a significant decline in gross receipts or were forced to partially or fully suspend operations due to COVID-19. Additionally, businesses must have paid qualified wages to employees during the relevant periods.
Gross Receipts Test
To qualify for the ERC, businesses must meet the gross receipts test. This test compares the business’s gross receipts in the current quarter to the same quarter in the prior year. The business may be eligible for the ERC if the gross receipts are less than 80% of the prior year’s gross receipts.
Partial or Full Suspension Test
Alternatively, businesses may be eligible for the ERC if they were forced to partially or fully suspend operations due to government orders related to COVID-19. A partial suspension occurs when a business’s operations are partially suspended due to COVID-19, while a full suspension occurs when a business’s operations are fully suspended due to COVID-19.
Qualified Wages
To qualify for the ERC, businesses must have paid qualified wages to employees during the relevant periods. Qualified wages include wages paid to employees who were not providing services due to COVID-19 and those paid to employees whose services were reduced due to COVID-19.
Claiming the ERC
To claim the ERC, businesses must file Form 941, Employer’s Quarterly Federal Tax Return, for the relevant periods. The ERC is a refundable tax credit, meaning businesses can receive a refund even if they have no tax liability.
Work With an Expert
If you want to ensure that your business is eligible for the ERC and maximize your tax savings, GetMyBizRefund can help. Our team of experienced tax professionals can guide you through the process and ensure you meet all the eligibility requirements. Contact us today to schedule a consultation and learn more about how we can help you.