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ERC

What is an Employee Retention Credit?

Our economic situation and outlook have changed dramatically since the beginning of the pandemic. To stabilize the business environment and provide relief to business owners, lawmakers and leaders have passed many policies that help American businesses stay afloat. One such policy is the employee retention tax credit.

Employee Retention Credit is a tax break available to small businesses which helps them tide over the uncertainty. First introduced in the CARES act in 2020 has enabled over 30,000 small businesses to claim over $1 billion collectively to run and grow their business.

If you’re unsure how you can claim these benefits or qualify as a beneficiary, please get in touch with one of our expert CPAs in Maryland at Sigma. We’ll definitely help you!

What Are The Maximum Amounts That A Business Can Claim For ERC Credit?

50% Tax Credit/Refund

For wages paid from 3/13/20 to 12/31/20 – the credit is 50% of qualifying wages up to $10,000 per year per employee –max of $5,000 per employee for 2020.

70% Tax Credit/Refund

For wages paid from 1/1/21 to 6/30/21, the credit is 70% of qualifying wages up to $10,000 per quarter per employee –max of $7,000 per quarter per employee for the first two quarters of 2021.

Who is eligible for ERC?

Any business that has been operational in 2020 and fulfills one of these two criteria.

  • Faced a Full or Partial Suspension Due to Government Order
  • Saw Significant Decline in Gross Receipts

If your business falls in one of these two categories, then you’re eligible for ERC.

For the purpose of this eligibility, significant decline in gross receipts refers to:

For 2020 ERC

A quarterly revenue decline of 50% or more compared to the revenue from the same quarter of 2019.

For 2021 ERC –

A quarterly revenue decline of 20% or more compared to the revenue from the same quarter of 2019

Employee Retention Credit Assistance is Available Now!

Receive assistance so your business can receive the maximum amount of employee retention credits for 2020 and 2021.

Reach out to Sigma Accountants for a Free ERC Estimate

    Maximizing Your Claims For Keeping Americans Employed

    Receive assistance so your business can receive the maximum amount of employee retention credits for 2020 and 2021.

    Reach out to Sigma Accountants for a Free ERC Estimate

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    Disruption of business operations

    If your business operations were forced to make drastic changes due to Covid-19 mandates and compliance are eligible for the tax credit. Examples include full/partial shutdown, supply chain interruptions, decrease in hours of operations etc. The IRS requires that businesses have a “substantial” effect on revenue or employment in order to qualify for tax credits. This means it must have impacted more than 10% of your business (revenue or employee status).

    Some examples of having to modify business operations for Covid-19 include (but aren’t limited to):

    • Limiting occupancy or social distancing indoors (common with preschools, retail, restaurants, grocery stores, gas stations as examples)
    • Having to limit customer access, reconfigure your floor space, or otherwise modify how customers access your facility.
    • Replacing dine-in with take-out only or any other “contactless” pickup and drop off services
    • Having to take appointments only instead of accepting walk-in clients (tattoo and piercing businesses are one example of this)
    • Having to apply a different format to your business operations to meet guidelines (requiring clientele and employees to wear face coverings & PPE, shifting work schedules food cleaning, implementing employee & customer screening, etc)

    What industries have and can receive the credit?

    While many industries were impacted by the COVID-19 pandemic, some sectors were particularly affected. The following trades or businesses saw significant business disruptions:

    • Daycares/Preschools
    • Medical Clinics
    • Restaurants
    • Gyms
    • Clubs & Bars
    • Boutique Hotels
    • Dentistry Practices
    • Performing Arts Organizations
    • Brick and Mortar Retail Stores
    • Jewelry Stores
    • Travel-related businesses
    What industries have and can received the credit?

    Optimizing the Employee Retention Credit

    If you received a PPP Loan in 2020, you are now eligible to receive ERC retroactively!

    Services

    The ERC calculation and documentation process provided by Sigma Accountants is designed to maximize the credit while fully validating the adherence to statutory requirements and recommended record keeping, resulting in a comprehensive, audit-ready deliverable.

    Process

    Sigma Accountants employs a centralized, technology-enabled process with built-in quality control processes. The process prioritizes efficiency and quality, to provide the most comprehensive deliverable while minimizing the impact on the client’s business operations.

    Deliverables

    Sigma accountants provides a complete, audit-ready deliverable covering the calculated tax credit. The deliverable is designed to respond to all statutory and applicable regulatory requirements regarding the claim. Audits of the tax credit claims follow a three-year rolling quarterly statute of limitations.


    ERC assistance from nationally recognized COVID relief benefits experts

    Your business can receive up to six to seven figures in refunds via Employee Retention Credit if they had to make adjustments over the last two years due to supply chain issues, capacity limitations, project delays or other pandemic-related impacts.

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    FAQs

    1. WHO IS ELIGIBLE FOR THE ERC?

    The company must have been in business in 2020 and meet at least one of the following conditions:

    • full or partial suspension due to an order from a government authority limiting commerce, travel, or group meetings
    • Significant Decline in Gross Receipts 

    2. HOW MUCH IS A SIGNIFICANT DECLINE IN GROSS RECEIPTS?

    For the 2020 ERC the quarterly revenue decline needs to be more than 50%. Employers would take their 2020 quarterly revenue and compare it to the same quarter for 2019.

    For the 2021 ERC the quarterly revenue decline has to be more than 20%. Compare 2021 quarterly revenue to the same quarter for 2019.

    3. WHAT PERIOD(S) CAN A BUSINESS CLAIM THE ERC?

    All of 2020 and the first two quarters of 2021. You will need to determine whether the business qualifies under the full or partial suspension of operations or from a revenue decline.

    4. WHICH EMPLOYEES CAN A BUSINESS CLAIM THE ERC FOR?

    If you are a small employer the ERC can be claimed on ALL employees.

    Wages paid to owners and spouses are eligible but not other related individuals.  Family members such as siblings, children, parents, grandparents, etc. are ineligible for this credit.

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    5. WHO IS A SMALL EMPLOYER FOR ERC PURPOSES?

    A small employer is defined as having 100 or fewer full-time equivalents (FTE) when claiming the 2020 ERC. A small employer is defined as having 500 or fewer FTEs in order to claim the 2021 ERC. In both cases, the reference period is 2019 employment. In other words, for 2021 ERC, the reference period is NOT 2020 FTEs. Affiliation rules also must be analyzed in computing the FTEs.

    6. WHAT WAGES ARE ELIGIBLE FOR THE ERC?

    This is generally gross wages plus employer health insurance costs. The maximum qualified wages are $10,000 per year, per employee for 2020 and $10,000 per quarter, per employee for 2021.

    Formerly, under the CARES Act, if an employer obtained a PPP loan, it could not benefit from the ERC employee at all. The CAA law changed this rule retroactively for 2020 and 2021 to require both PPP and ERC not be used on the exact same wages. Therefore, wages claimed on the PPP loan cannot be claimed for ERC.

    Also, wages claimed for emergency paid sick leave and emergency paid family and medical leave under the Families First Coronavirus Response Act (FFCRA) are not qualified wages.

    7. WHAT ABOUT MY PPP LOAN(S) AND CAN I GET ERC TOO?

    More IRS guidance on the interaction of PPP and ERC is needed, particularly when a business has already applied for or received PPP loan forgiveness. You should contact us to perform an analysis of the program interaction and your eligibility for ERC.

    8. WHAT IS THE AMOUNT OF ERC CREDIT FOR EACH YEAR?

    For 2020 the credit amount is 50% of qualified wages up to $10,000. This includes the entire year.  For 2020 the maximum credit per employee is $5,000.

    For 2021 the credit amount is 70% of qualified wages up to $10,000 per quarter. For 2021 the maximum credit per employee is $14,000. The 2021 ERC expires on June 30, 2021.

    9. HOW DO YOU CLAIM THE ERC?

    The ERC is not an income tax credit, it is a payroll tax credit and is ultimately processed on Form 941, 941X and/or filing Form 7200 for an advance credit.

    10. IS THE ERC CREDIT TAXABLE?

    Yes. The ERC credit is subject to income tax.