Small Businesses Who Qualify for the ERC Tax Credit
Small businesses were hit hard by COVID-19 regulations and restrictions. Between full lockdowns in March 2020 and limited indoor capacity requirements throughout the year, businesses were forced to adapt their operations to new protocols. Some businesses, such as movie theaters and event spaces, had to shut down completely for a duration of time in 2020. Others were able to stay open under certain stipulations, such as restaurants only being able to offer takeout.
If your small business was impacted by the pandemic in the 2020 and 2021 tax years, you may qualify for the Employee Retention Tax Credit (ERC).
What Types of Businesses Qualify?
The ERC tax credit does not limit itself to certain industries. Some industries were hit harder than others with strict rules and new regulations. These industries include:
● Entertainment venues (movie theaters, concert venues, clubs)
● Hotels, resorts, and motels
● Restaurants and catering
● Beauty services (salons, spas)
If your business does not fall into one of the categories above, it does not mean that it does not qualify. As long as your business qualifies under other ERC eligibility requirements, you can still apply.
ERC Rules for Applying
Your business can qualify for the ERC tax credit if it meets the following requirements:
● Your business did not have over 100 employees on payroll in the 2020 tax year.
● Your business did not have over 500 employees on payroll in the 2021 tax year.
● Your business saw a decline in gross receipts over 50% or business operations experienced either a full or partial suspension due to COVID-19 government regulations and lockdowns.
If your business does not fully qualify for the ERC tax credit, you could risk getting audited by the IRS for false claims on your application. You do not want to be in hot water with the IRS. This could lead to fines or further penalties. If you are unsure whether or not you qualify, consult with a certified tax attorney or tax accountant when filling out your application.
When Will I Receive My Tax Credit or Refund?
The ERC tax credit is a refundable tax credit. This means that if you are approved for an amount that exceeds what you owe for that tax year, the rest will come back to you as a refund. To check your ERC refund status, you can contact either your consultant or the IRS. However, due to delays, it is likely that you will not receive your refund for even a few months. For this reason, you should not wait for the deadline to apply. Applying faster means you can receive your refund faster for an amount that can seriously help sustain your business post-COVID.
What If I Don’t Qualify?
If your small business does not qualify, there are still plenty of other ways to help your business financially recover in a post-COVID world. For one, find business expenses that you can either reduce the cost of or cut altogether. Determine which areas of your business provide opportunities to save money while you promote business growth to make up for COVID financial loss. You can also keep an eye out for other government incentives that can help small businesses grow their revenue and save money.