Understanding Employee Retention Credit Eligibility

The Employee Retention Credit (ERC) was established by the federal government to provide a refundable payroll tax credit to help businesses cover the cost of keeping staff employed. Many companies have been financially affected by the COVID-19 pandemic in the past two years and, while it is likely that no government program can fully compensate for the profits lost due to the closure of facilities and the general loss of business, the ERC can help provide significant relief. To successfully meet the obligations surrounding the ERC, employers can outsource the entire process. As a result, they can take full advantage of ERC and its benefits by relying on up-to-date technological solutions in combination with tax credit specialists who help employers identify if companies are eligible, apply for the full amount of credit, and ensure proper payroll tracking and documentation.

The ERC calculation is based on total qualified salaries, including health plan expenses paid by the employer to the employee. Contact an Experian tax expert directly with an Experian Employer to learn more about ERC eligibility. However, to minimize risk during the claim process, employers must understand who qualifies for the ERC, as well as other aspects of ERC eligibility and applications. In addition, maintaining appropriate documentation is a key element needed to meet all compliance requirements. Changes in programs and incentives for companies have made it difficult for many people to understand ERC qualifications.

There are several factors to consider when evaluating eligibility under the government order test, and they often depend on whether the company was partially suspended. Before filing a claim with the ERC, employers must fully understand their background and best practices in order to prepare for a possible ERC audit of the IRS. The requirement for the fourth calendar quarter that a recovering startup company should not be an eligible employer due to a total or partial suspension of its operations or a decrease in gross revenues was eliminated. Skilled nursing facilities have tended to avoid the employee retention credit because of their complexity, even though they are likely to meet the eligibility requirements. When ERC was introduced in the CARES Act, a company that received a Paycheck Protection Program (PPP) loan was not eligible for the ERC. However, eligible employers can still apply for the ERC for previous quarters by filing the appropriate adjusted employment tax return within the time period set out in the instructions on the corresponding form.

At the same time, the government order test does not require a decrease in gross income for the employer to be eligible. Although a large number of employers who were otherwise eligible for the ERC did not apply for the credit, they still have time to file amended payroll tax returns and take advantage of the ERC. Eligible businesses that experienced a decline in their gross revenues or that closed due to a government order and didn't apply for the credit when they filed their original return can take advantage of it by filing adjusted payroll tax returns.

Denise Lefler
Denise Lefler

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