Is Your company leaving money on the table? ERC Credit explained
Is Your Business Leaving Millions On The Table?
The pandemic has changed the business environment in unimaginable ways. Companies that seemed to be on solid footing pre-Covid found themselves struggling to pay their rent, their bills, and their employees.
Fortunately, Congress stepped in to help by passing the CARES Act, a $2.2 trillion economic stimulus bill that provided a lifeline to countless small business owners in the form of the Paycheck Protection Program. This $953 billion business loan program, one of the best-known pieces of the CARES Act, was established to help small businesses continue to pay their workers during the uncertainty of the pandemic.
While most of us are aware of the PPP, there’s another part of the CARES Act that many people aren’t familiar with – and it can be just as helpful for business owners, if not more.
It’s called the Employee Retention Tax Credit and like the PPP, it was created with the goal of encouraging businesses to keep employees on their payroll through the pandemic. Unlike the PPP, the ERC is not a loan. Rather, it’s a cash credit that can be worth thousands – and in some cases, millions – to business owners who qualify.
Initially, the program was limited to certain types of very small businesses with 50 employees or less but has since expanded to a variety of industries and companies with up to 1,000 employees. According to Patrick Moraites, a partner and vice president of business development for Tampa-based AXIS Group, the expansion means that many business owners may be eligible to receive funds and they don’t even know it. In other words, it’s definitely worth taking the time to explore their eligibility.
“We recommend that everyone should at least take a look under the hood because this is money that comes back not as a tax credit on your tax return but actually as a hard check to you from the IRS,” Moraites said. “Plus, there are no stipulations – you can do whatever you want with the money.”
As the program stands now, the maximum credit is $7,000 per employee per quarter. Currently, the credit can be applied for the first two quarters of 2021 with quarter three soon to come. Moraites said that it’s expected the program will be extended for quarter four as well.
There are a variety of factors that influence how much money a business is qualified to receive including revenue quarter over quarter, the number of employees, the amount of wages they earned and whether the business received PPP funds or money from the Small Business Administration
“There are a lot of different moving parts so it’s not very easy to just take a glance at the program and figure out if you qualify,” he said. “That’s why it’s so important for companies to go through the process, especially if they already went through the PPP loan – they already have the documentation on hand so it won’t take them that long to get started.”
Because the ERC is so complex, AXIS Group has partnered with Archetype Consulting Group, an advisory firm that specializes in disaster tax credits. The partnership allows AXIS clients – and even those who aren’t working with AXIS – to determine their qualification more efficiently and maximize the credit for those that qualify.
“We’ve seen a restaurant with as few as 15 employees receive $45,000 in credit,” Moraites said. “And we’ve seen a restaurant with 500 employees receive $1.6 million that they used to acquire two other locations.”
What is the ERC tax credit for employers? It is simply a tax credit that provides cash to employers who experienced a reduction of receipts due to pandemic-related government orders while keeping employees on the payroll
To get the ball rolling, you simply need to answer a few questions such as:
- Were you affected by the closure or suspension of your business during the pandemic?
- Do you have more than one location?
- Did you receive funds from the Payroll Protection Program?
Start the process by clicking here and completing the form. If you qualify, ACG will handle the calculation of your credit and provide you with an audit-ready package ready for submission to the IRS for your credit. The turnaround time is, on average, less than five business days once you submit your documentation.
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