ERC Alternative Quarter Rule

Learn how your business can pocket tens of thousands of dollars or more in 2021 employee retention tax credits under the ERC alternative quarter rule.

Transcript:

For 2021 most businesses qualify for refundable payroll tax credits based upon a reduction in gross receipts. However, a little-known qualifying rule that most people have no clue about can put tens or even hundreds of thousands of extra dollars in your pocket.

So, stick around and make sure you get all the free stimulus money your business is entitled to.

Hi. I’m Larry Kagan from Baron Payroll. The key to learning if your business qualifies for refundable employee retention tax credits in 2021 is comparing your quarterly gross receipts from 2019 to 2021.

In general, for 2021, your business will qualify for an ERC if the gross receipts per quarter are 20% or lower than the same calendar quarter in 2019. So, most people do exactly that.

They compare the same quarter in 2019 to 2021, and they stop there. Because each quarter’s comparison stands on its own, many companies may qualify for some quarters, and not qualify for others.

Here’s where this little-known hidden gem comes in. For calendar quarters in 2021, the IRS added an alternative quarter election rule. This rule allows business owners to use the prior calendar quarter to qualify for the current quarter.

So, this rule helps companies qualify for quarters they might not have qualified for. This means more stimulus money in your pocket.

For example, if in quarter one you had a 26% reduction, in quarter two you had a 12% reduction, and in quarter three you had a 23% reduction, most people think they don’t qualify for quarter two because the decrease was less than 20%. However, you would qualify for all three quarters, including quarter two using the alternative quarter rule.

 You’re eligible in quarter two because you qualified in quarter one—the previous quarter. Pretty amazing, huh?

And the best part is once you use the alternative quarter rule, as we did in this example for quarter two, you’re not locked in. You can jump back and use 2019 vs 2021 method for the other quarters, as we did in this example for quarter three.

Because of little-known intricacies in rules like these, we strongly suggest you work with an ERC expert to ensure your business gets all the free stimulus money you’re entitled to.

Not sure how to get started? Give us a call and we'll help you figure it out.