Employee Retention Credit (ERC)
How To Receive Up
To $26K Per Employee
What You Need To Know
The Employee Retention Credit (ERC) offers up to $26k per employee for eligible businesses. Companies applying for and receiving this credit require financial services, oversight, and expertise to optimize potential benefit, ensure timeliness, and guarantee audit defender protection.
SeatonHill Partners can help.
Beyond helping, these services are completed by the expertise of Tax Credit Attorneys and include audit defender protection to ensure that the application is auditable and will stand up to any scrutiny even in the extended timeframe to 5-year period for ERC submissions. Beware of the ERC providers that have you fill out your own forms and leave you to defend for yourself.
In addition, the payment for our services can be split up and deferred to closer to when your company’s ERC payment is received.
What is the Employee Retention Credit (ERC)?
During the COVID-19 crisis, The CARES Act (Coronavirus Aid, Relief, and Economic Security) created the ERC for 2020 to help businesses retain employees. The ERC, a refundable payroll tax credit for qualifying wages, was paid to assist businesses with retaining full-time employees between March 13 and December 31, 2020. The ERC was later extended through September 30, 2021, making it retroactively available to many businesses.
Is Your Business Eligible for the ERC?
Eligibility for the ERC can be based on different factors, including:
Businesses that were ordered to shut down operations fully or partially due to government orders that limited travel, commerce, or group meetings/gatherings.
Businesses that had a decline in gross receipts by 50% during any quarters of 2020 (as compared to the same quarter of the prior year).
Businesses that had a decline in gross receipts by 20% for quarters 1-3 of 2021 (as compared to the same quarter in 2019, pre-pandemic).
Nonprofit organizations are also eligible.
How much is the ERC worth?
For 2020: the ERC is calculated as 50% of the qualifying wages (up to $10,000) that an eligible employer paid employees between March13, 2020 and December 31,2020. That translates to a credit of up to $5,000 for each retained employee during that period.
For 2021: the ERC is calculated at 70% of qualifying wages (up to $10,000) that an eligible employer paid employees during Q1, Q2, and Q3. That translates to a credit of up to $7,000 for each retained employee per quarter (totaling up to $21,000 per employee).
Total: eligible employers can earn up to $26k per retained employee for the combined eligible periods of 2020 and 2021.
ERC Claim Success Stories
These are a few success stories from clients that we helped with their ERC claims.
A Texas restaurant was ordered to reduce its seating capacity to 25% during the COVID-19 crisis. The restaurant tried to make up revenue through carryout ordering or curb side service. The employees were kept on the payroll, but the limited seating capacity caused a significantly negative impact. The restaurant sought our financial advisory and successfully claimed a total of $326,321 in ERC.
A dentist was ordered to discontinue all non-emergency visits and procedures during the COVID-19 crisis, closing the office completely but retaining the staff on payroll. The discontinuation of services caused a significantly negative impact. The office sought our financial advisory and successfully claimed a total of $81,233 in ERC.
A nonprofit medical practice was significantly impacted by state and local orders that required additional sanitation between visits, limited waiting room capacities, and had patients waiting in their cars, reducing the number of visits. They sought our financial advisory and successfully claimed a total of $582,845 in ERC.
ERC Example Claim:
If a company retained 20 employees on the payroll between March 13, 2020, and December 31, 2020, and each were paid at least $10,000 during that year, that would result in being eligible for a $5,000 credit per employee, totaling a claim of $100,000. The might be a larger claim depending on eligibility from changes instituted by the CAA.
ERC and the Consolidated Appropriations Act Facts:
For the period between March 13, 2020 and December 31, 2020, the Consolidated Appropriations Act (CAA) includes the following retroactive changes to the ERC:
If your business received a Paycheck Protection Program (PPP) loan, you could claim the ERC for qualified wages not paid with proceeds from the forgiven portion of your PPP loan.
Group healthcare expenses are considered “qualified wages”, even if no other wages are paid to that employee.
How other Tax Credits and Relief Provisions Impact the ERC
An eligible employer's ability to claim the ERC can be impacted by other credit and relief provisions:
Research & Development Tax Credit: a denial of double benefit disallows taxpayers from claiming both the ERC and the R&D Tax Credit.
Work Opportunity Tax Credit: employees do not count toward the ERC if the employer is allowed a WOTC.
Families First Coronavirus Response Act: wages claimed for the ERC cannot include wages for which the employer received a tax credit for paid sick and family leave under the Families First Coronavirus Response Act.
Paid Family and Medical Leave: wages counted for the ERC can't be counted toward the credit for paid family and medical leave.
Paycheck Protection Program: if an employer received a Small Business Interruption Loan under the PPP, and an eligible employee’s wages are used to substantiate the forgiveness of a PPP loan, those same wages cannot also be used to claim the ERC.
What is the Recovery Startup Business provision?
The Rescue Act contains a new provision for 2020 startups (referred to as a “recovery startup business”). Under the Rescue Act, the ERC is only available for Q3 and Q4 for Recovery Startup Businesses. Companies covered under this provision must meet the following criteria:
established after February 15, 2020
annual gross receipts of no more than $1 million
meets the ERC eligibility test, with exception of the general ERC
employer requirements (reduction of gross receipts, suspension by government mandate, etc.)
credit limited to $50,000 per quarter
How To Access The ERC
Eligible companies can immediately claim the ERC by reducing the payroll taxes you send to the IRS. To claim the new version of the ERC, eligible employers must report their total qualified wages with the related health insurance costs for each quarter on their quarterly employment tax returns (Form 941 for most employers), while noting the following:
For 2020 - Q2 of 2021: the credit is taken against the employer's share of Social Security tax, but the excess is refundable.
For 2021 Q3: the credit is applied against Medicare, and any excess is refundable.
If a company’s ERC credits exceed payroll taxes, a direct refund from the IRS can be requested.
Contact Us to Calculate, Claim, and Maximize Your ERC
Calculating the Employee Retention Credit can be a complex, time-consuming, labor-intensive process that requires a thorough review of payroll and financial records, along with mandated closures and how your business was impacted. The ERC also requires taking other potential tax credits into consideration and determining which are more beneficial to your business.
Aside from the burden of preparation, your company could be exposed to scrutiny and under calculating your claim. Contact us assess, prepare, protect, and maximize your eligible tax credits!