6 Top Myths About Getting an ERC (Part 1)

Debunking these 6 top ERC myths will help you qualify for, and easily collect the Employee Retention Tax Credit money your small business deserves.

This is the first one of our two-part  "6 Top Myths About Getting an ERC" video. Please also check  6 Top Myths About Getting an ERC (Part 2).

Transcript:

There’s a lot of confusion surrounding employee retention payroll credits/ERCs. Debunking these ERC myths will help you qualify for and easily collect the refundable tax credits your business deserves.

Here are myths 1, 2, and 3.

Hi, I’m Bill Elkins with Baron Payroll. How much money are these refundable ERCs worth? If you’re like most business owners, you’ll be pleasantly surprised by how much your ERCs are worth.

In fact, it’s commonplace to receive checks for hundreds of thousands of dollars. The easy math works out to $26,000 per employee.

For 2020 the tax credit is calculated by taking 50% of the first $10,000 of qualified wages for the year. The credit is limited to $5,000 per employee for all of 2020. This applies to employers with fewer than one hundred employees.

For 2021, the ERC program greatly expanded. The credit is 70% of the first $10,000 of qualified wages in quarters 1, 2, and 3, and applies to employers with fewer than five hundred employees. This works out to up to $21,000 per employee.

Myth number one, our gross increased so we didn’t qualify. Having a gross revenue reduction isn’t the only way to qualify for these refundable payroll tax credits.

The second possible way to qualify is based on business impact. If due to any COVID-19 government order your business operations were impacted or changed during a specific calendar quarter, then you probably qualify.

Here are some examples of Yes or No questions businesses use to help determine if their business was impacted while under a federal, state, or local executive order.

One, did you have to change your hours of operation due to COVID-19?

Two, was your trade or business partially suspended?

Three, did your business experience any supply chain issues?

Good news! Yes answers generally indicate your business qualifies.

Myth number two, our gross receipts didn’t drop by 50% or more, so we don’t qualify. A 50% or more reduction was a requirement for 2020. However, in 2021 the eligibility rules changed, and you only need to have a 20% or more reduction in gross receipts to qualify.

The key to understanding the ease of qualifying is to remember that you’re comparing your quarterly gross receipts to the same period in 2019—a pre-pandemic year when your business was likely thriving.

Myth number three, it’s too late to apply for an ERC. This myth is easily slain with one word, amended. Simply file an amended 941-X form for your 2020 and 2021 tax returns.

The 941-X form applies to prior quarters, including those in 2020. So, if your eligible business failed to claim an ERC, it’s definitely in your best interest to file now or forever give up what may among to a lot of money for your business.

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