Who is Eligible for Employee Retention Credit (ERC)?

The Employee Retention Credit (ERC) is a program established under the Coronavirus Aid, Relief and Economic Security (CARES) Act to provide an incentive to companies that meet the requirements to keep their employees on the payroll and maintain their business during the financial crisis caused by the pandemic. Windes, a California-based tax planning firm, offers ERC qualification assistance to help employers determine if they qualify for the ERC. To be eligible for the ERC, an employer must have experienced a significant decrease in gross income or have been subject to a government shutdown order. For an employer that qualifies for the ERC under the requirement of a government order, business operations must be fully or partially suspended during the applicable calendar quarter due to a government order that limited commerce, travel or group meetings due to COVID-19. Many companies have overlooked the ERC as a relief option, since the CARES Act originally prohibited an employer from receiving both a Paycheck Protection Program (PPP) and the ERC loan.

However, if a customer has applied for a PPP loan and will be forgiven for it, they may now be eligible for the retention credit for employees with certain salaries. Before filing a claim with the ERC, employers must fully understand their background and best practices in order to prepare for a possible IRS ERC audit. It is important to ensure that all eligible expenses, including non-payroll costs such as utility, rent and operating expenses, are included in PPP loan forgiveness requests in order to maximize the qualifying salaries available to the ERTC. This applies if your company received Paycheck Protection Program (PPP) loans, as long as ERC salaries are not treated as payroll costs to obtain PPP loan forgiveness.

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. Fortunately and sadly, almost every sector and type of business was affected by the pandemic, which means that there is a good chance that you and your company will be eligible to receive the employee retention tax credit. To be eligible for credit, companies must have experienced a significant decline in their revenues or have been forced to close their doors due to the pandemic. Understanding your ERC eligibility can help you make informed decisions about how best to support your employees and maintain your business operations.

Denise Lefler
Denise Lefler

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