Since the Employee Retention Tax Credit (ERTC) was introduced in 2020 as part of the CARES Act there have been many updates and expansions. Luckily for business owners, these updates have made the ERTC more accessible to businesses that are struggling to get back on track after a difficult two years.
With so much relief funding at stake for your business, don’t fall prey to myths and rumors. We’re here to debunk these myths so you can get a clearer picture of your potential ERTC eligibility. You can also see if you qualify for ERTC with our 2-minute quiz.
Myth #1: We’re ineligible due to our PPP loan
In 2021, you can apply for both PPP loan forgiveness and ERTC. What you cannot do is claim ERTC on the same wages you’ve used for PPP forgiveness. Remember, you can use other expenses for up to 40% of PPP forgiveness, leaving more qualifying wages for ERTC. Your employee retention tax credits also do not have to come from a single sequential block of time. The shorter time window you use for PPP forgiveness, the longer time window you can used towards ERTC.
Myth #2: We’re ineligible because we did not get shut down by the government
Your business does not have to have shut down to show an economic impact from COVID-19, so you can be eligible with no shutdown order at all. But don’t forget to consider whether you had reduced operations. For example, was the capacity of your business limited? Did you have to change your hours of operation due to curfews? Both of these would qualify as partial shutdowns. If your business was deemed essential but critical suppliers were not, was your supply chain cut as a result? If this kept you from operating your business, you were still impacted by an order. Remember to document everything.
Myth #3: We’re ineligible because our income did not drop enough
First, remember you don’t need to show a drop in receipts if your business was under a government shutdown order or if it is a recovery startup business. Remember, you’re comparing each quarter to the same period in 2019, when the economy was booming and business was good. You may show more losses than you think against those strong 2019 quarters. For 2021, you only have to demonstrate a 20% or greater decline in gross receipts.
Myth #4: ERTC funds will run out soon
Many business owners have heard about the IRS backlog and wonder if the money for ERTC will run out before they can receive their refund. The answer is no! The ERTC is a refundable tax credit, not a loan or grant program like the PPP with funds set aside by Congress. Therefore, ERTC cannot run out of money. And although the turnaround time between filing amended 941-X and receiving a refund has been running 4-6 months, the IRS is getting faster all the time.
Our ERTC tax filing service will calculate your refund and then file the amended tax returns on your behalf.
ERTC is one of the single largest small business stimulus in US history and was created to help businesses like yours. Take a few moments to see if you qualify for up to $26,000 per employee.
NOTHING IN THIS COMMUNICATION CONSTITUTES LEGAL OR TAX ADVICE OR A GUARANTY OF ELIGIBILITY OF AN EMPLOYEE RETENTION TAX CREDIT. ELIGIBILITY DETERMINATIONS RELATED TO THE EMPLOYEE TAX RETENTION CREDIT ARE THE RESPONSIBILITY OF THE EMPLOYER.