Employee Retention Credit (ERC)
ERC, The Last of the COVID-19 Stimulus?
As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March of 2020, the Employer Retention Credit was designed to provide a refundable employment tax credit to help businesses with the cost of keeping staff employed during the pandemic.
This tax credit unlike the EIDL, is not a loan and is not paid back over time. Instead, this is a one-time payment from the IRS to your business to help offset the cost of keeping employees. The amount of credit your business may qualify for is derived from your qualified wages paid between March 12, 2020 through September 30, 2021.
Program Eligibility and Credit Amounts Should Only Be Determined by Qualified Individuals and Service Providers.
There is a ton of misinformation regarding ERC...
While we cannot combat all misinformation out there, we can help by answering some basic frequently asked questions.
Yes. Your business can still be eligible to receive Employer Retention Credits, however the amount you may be eligible for will be reduced.
This is a common question, and the short answer is there is a maximum your business can receive. Currently, the max amount your business can receive is $26,000 per employee during the covered period.
The required documentation is typically found from either your CPA or through your Payroll Provider. Some ERC service providers may also offer to pull this data on your behalf. Not sure where to start? Let’s start with some basic info HERE
Nobody can accurately predict when a company or person is going to be audited. The same goes for ERC. We do recommend that if you apply for ERC you do so with a provider that is willing to supply you will all documentation to assist in the event your business is audited or one that offers audit protections. The Ragnar Group Inc. only works with ERC providers that offer these services.
Yes. You business can still qualify for ERC.
There are currently no restrictions on what the funds can be used for. Since these funds are technically a refund of taxes already paid, there are no strings attached. Utilizing these funds could be just the boost your business needs to help gain and retain employees.
Possibly. We have found that while your CPA can certainly be a great source of information in filing for ERC, there are many intricate layers to this program. For that reason we feel more comfortable leaving the filing to individuals and firms that focus in this area. Think about it like this, would you trust your Estate attorney to represent your business in international tax law? No. Why? Because even though the Estate attorney is an attorney, they may not be as qualified to represent you in international tax law matters. Same logic applies to ERC.
No. Your business may also qualify under the Government Mandate Test. You may also hear the term “Governmental Order” to describe this test. These describes situations where a business may be eligible without having a decrease in revenue. For example, if a governing body mandated businesses restrict the amount of occupancy in a business, this may qualify that business under the Government Mandate Test. Work with your ERC professional to establish what may and may not qualify.
General rule of thumb is 500 full-time employees. However, full-time employees is based on the IRS definition. If you have over 500 employees, you may still be able to qualify. Check with your ERC professional for exact qualifications and definitions.
We cannot speak for all ERC providers however the providers we work with all offer initial ERC qualifications and estimates free of charge. Their fees are contingent upon your business receiving the credit from the ERC program and is typically a percentage based on the total amount received.
So far the average time from application to funding is running between 6 – 9 months. There are ERC providers that are now offering advanced funding for an additional charge if you are looking for a quicker turnaround. There are pros and cons to using advanced funding and you should always consult with your advisors, tax professionals and attorney prior to entering into an agreement.
Yes, nonprofits including churches can claim ERC as long as they meet the eligibility requirements.
Let's get started to see if your business qualifies.
Disclaimer: You should always consult your tax, legal and/or financial advisor when making financial decisions. The Ragnar Group Inc. may be compensated for referring ERC service providers in addition to any compensation derived from providing insurance and financial services. The Ragnar Group Inc. nor any of its wholly owned subsidiaries directly provide ERC service or filing.