WHAT IS THE EMPLOYEE RETENTION CREDIT?
The Employee Retention Credit (ERC — sometimes written ERTC) is a refundable tax credit available to businesses affected by the Covid-19 pandemic in 2020 or 2021. All kinds of businesses are eligible, so long as the business had W2 employees on payroll. This includes for-profit corporations (both C-Corp and S-Corp) as well as non-profit organizations and religious organizations. The maximum recovery is generally $26,000 per employee, though actual recoveries depend on the impacts experienced by the individual business.
The ERC was instituted by Congress, as part of the CARES Act and subsequent legislation, to compensate businesses that continued to pay their employees during the pandemic. Unlike the PPP, which was conceived as a loan to cover payroll expenses in 2020, the ERC is a refundable credit that covers 2020 and 2021. Even if you received a PPP loan and had it forgiven, your business may still qualify for the ERC.
WHAT MAKES A COMPANY ELIGIBLE
If your business had W-2 employees during 2020 or 2021, you may qualify for an ERC if:
- You experienced a loss in quarterly revenue compared with 2019, or
- You had to partially suspend your business’s activities due to pandemic restrictions (such as capacity limits or shutdowns) on your business or suppliers in your supply chain.
There’s a common misconception that the ERC is available only to businesses that had to shut down entirely, or to essential businesses. This is not the case. You can find out if your business qualifies for the ERC free of charge by filling out our pre-qualification form.
HOW DO I TELL WHAT’S A SCAM AND WHAT’S LEGITIMATE?
Many businesses tell us they’ve received spam emails advertising the ERC as some kind of guaranteed way to get free money from the government. Any such promises are misguided, and being too aggressive in your ERC filing can result in significant penalties. However, spam notwithstanding, the ERC is a legitimate tax credit, and Spider ERC has helped individual clients obtain hundreds of thousands of dollars in credit to which they didn’t even know they were entitled.
To combat the spam, we encourage you to read what the government itself has to say. Here is a one-page summary from the Treasury Department, an overview from the IRS about the 2020 qualification provisions, and a subsequent overview from the IRS about the (more generous) 2021 qualification provisions. These documents can be a bit confusing, and filing for the ERC on your own is probably ill-advised, but that’s why we’re here to help.
If you’d like to dive deeper into ethics, the inspiration, and the vision behind SpiderERC, check out this podcast episode with the leadership team.