Do you Qualify for Employee Retention Credits in 2021?

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The key to learning if you qualify for Employee Retention Tax Credits in 2021 is comparing your quarterly gross receipts from 2019 to 2021.

In general, your business will qualify for an ERC if the gross receipts per quarter are 20% or more lower than the same calendar quarter in 2019.

Quarterly ERC Calculation Examples

The following examples illustrate the quarterly gross receipt approach:

Q4 2020 vs. Q4 2019 – 28% reduction
Q1 2021 vs. Q1 2019 – 11% reduction
Q2 2021 vs. Q2 2019 – 30% reduction
Q3 2021 vs. Q3 2019 – 18% reduction

In this example, your business would qualify for an Employee Refund Tax Credit in Q1, Q2, and Q3 of 2021.

(However, if your business didn’t exist at the beginning of the same quarter of 2019, then you should substitute the same quarter of 2020.)

Baron Payroll ERC Eligibility Chart (for most companies)

To determine your eligibility, use this chart to collect and organize your gross receipts by quarter and year.

Use this Baron Payroll ERC Eligibility Chart to help determine your eligibility for an employee retention tax credit refund.

Discuss your 2021 ERC calculations with the experts at Baron Payroll.

How Much Can I Get?

Providing your business has under 500 employees, and had a 20% or greater quarterly loss in revenue, you can get an IRS refund check for up to $21,000 per employee.

How Can I Receive My ERC Money?

If you haven’t applied for an ERC yet, all you need to do is file an amended payroll Form 941X for the quarters you were an eligible employer.

Why Does All This ERC Information Sound New?

The reason this sounds new, is because the ERC rules have been updated three times since originally enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March of 2020 by the Taxpayer Certainty and Disaster Relief Act of 2020 (Relief Act), the American Rescue Plan (ARP) Act of 2021, and the Infrastructure Investment and Jobs Act (IIJA).

Can I Elect to Use an Alternative Quarter to Calculate Gross Receipts?

Yes. For calendar quarters in 2021, the IRS added an alternative quarter election rule giving employers the ability to look at a prior calendar quarter and compare it to the same calendar quarter in 2019. This rule helps employers qualify for quarters they might not have qualified for. This is one of those hidden gems you’ll be glad you found. This election rule falls under the Safe Harbor Law.

What is the Safe Harbor Law, and How Does it Affect ERCs?

The Safe Harbor Law lets employers use prior quarter gross receipts to determine eligibility for the current quarter. For example, if in Q2 2021 you don’t qualify, you can elect to compare Q1 2021 to Q1 2019 sales. Once you use the alternative quarter method, you’re not locked in. You can choose to use the 2019 vs. 2021 method for the other quarters.

Why was the Safe Harbor Law Created?

The law was created because Congress wanted employers to be able to participate in multiple COVID-19 relief programs (PPP loans and ERCs)—providing of course that the same wages were not reimbursed by other programs. In other words, no double-dipping is allowed. 

 

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