Since the Employee Retention Credit program rolled out, many queries have arisen. There are concerns about the qualification, the claims, and the process going round. We cannot blame those raising these queries too. The concerns are subjective, yet someone has to ask them—several government-run programs in a year, each with terms and nomenclature triggering queries. Employers or business owners know the struggle they had to face when running or pausing their business in 2020. The pandemic has shaken everyone; even now, people are struggling to rise again. Here are a few myths we try to debunk to ensure employers and employees benefit mutually and survive.
Myth#1- It should be a Big Business
No. If you want PPP Loans, then your company should follow the headcount rules it has laid down in the Small Business Administration Guidelines. Take count of the full-time employees and not any part-time employees.
Myth#2- My Business Opened Pre-pandemic
Even if your business opened in 2019, you can use the quarter operating and determine the decline in revenue. You may use that to show the recession in the gross receipts in that quarter. You will require help and guidance in all forms to verify your qualifications from experts. They will help in knowing if you fulfilled all of these or not.
Myth#3- I am already in the PPP Plan
Yes, this was a practice when the ERC plan first rolled out. But now, this has changed. If the wages fall under payroll costs when you obtain PPP forgiveness, your wages may not qualify. Otherwise, there is nothing to stop you from availing of the ERC.
Myth #4: My Business Should have a Decline in Revenue
Per the CAA, the reduction in the first three quarters of 2021 should be from 50% to 20%. If your business has seen this anything during the pandemic, you become eligible. You should review the previous quarter and see if it has faced anything 20% loss. The IRS bulletin provides thorough detail on which clauses it has excluded and which ones it has not. There are clear lists on which PPP loan forgiveness is exempted and which is allowed. These all shall help you get an idea while you make a list. You collect all the gross receipts and note the period when your business fully or partially functions.
Myth#5- Losing the ERC By Not Filing in 2020 or 2021
This is why the IRS has allowed businesses to file corrections in three-quarters of the original quarter. If you followed the government order and did not function fully or partially but still paid the taxes, you can receive a refund.
There are many such myths surrounding ERC that you can amend and learn in the process. Seek the help of experts in taxation if you still have concerns about ERC eligibility.
