Is Your Small Business Eligible for an ERTC (employee retention tax credit)?

There may be money out there for your small business if you look hard enough….have you looked into whether your company is eligible for an ERTC (employee retention tax credit)?

The American Rescue Plan (ARP) further extended the ERTC to September 30, 2021 for those eligible companies, with the passing of the Infrastructure Investment and Jobs Act. For 2021, eligible employers can get a credit equal to 70 percent of qualifying wages per quarter. The maximum credit per quarter is $7,000 per employee.

To be eligible for the tax credit, your company has to pass one of the two tests below:

Government Order Test: An employer is an eligible employer if it experiences a calendar quarter “in which the operation of the trade or business is fully or partially suspended during the calendar quarter due to order from an appropriate government authority limiting commerce, travel or group meetings (for commercial, social, religious or other purposes) due to COVID-19.”

Reduced Gross Receipts Test: An employer is an eligible employer if it experiences a significant decline in gross receipts.

For 2020, a significant decline in gross receipts is defined as a decline in gross receipts of at least 50 percent in any calendar quarter in 2020 when compared to the same calendar quarter in 2019.

For 2021, a significant decline in gross receipts is defined as a decline in gross receipts of at least 20 percent in any calendar quarter in 2021, through September 30, 2021, when compared to the same calendar quarter in 2019.

If this test is failed, a special rule (alternative method) for 2021 allows the eligible employer to use the gross receipts in the immediately previous quarter compared to the same quarter in 2019 to determine a gross receipts decline of greater than 20 percent.

• For 2020 credits, an eligible employer is deemed to be a small employer if they have 100 or fewer average full-time employees.
• For 2021 credits, an eligible employer is deemed to be a small employer if they have 500 or fewer average full-time employees.

If you pass the tests above, please reach out to us at Rockridge Financial Services and we’ll be happy to see just how much in tax credits you may be entitled to!