Qualified small to medium-sized businesses that experienced a significant decline in revenues during the COVID-19 pandemic or were forced to partially or fully shut down due to a government order can still claim a refundable payroll tax credit to help soften the blow.
Many business owners hesitate to claim this credit because of the paperwork involved. Depending on the size of the business, the savings can be significant.
The Employee Retention Credit, or ERC, which was introduced under the CARES Act in 2020 and later expanded in 2021, offers a credit of up to $5,000 per eligible employee for 2020 and $7,000 per eligible employee for each quarter of 2021 (excluding Q4).
The following are answers to some of the most common questions business owners may have:
The ERC ended on September 30, 2021. Does this mean it’s too late to apply for the tax credit?
No. Qualified businesses have up to three years from the end of each qualifying quarter in 2020 and 2021 (Q1 through Q3) to apply for the ERC.
Can a business that received PPP loan funds in 2020 and/or 2021 take advantage of the ERC?
Yes. Eligibility for the ERC is not dependent on whether a business entity received a PPP loan. However, adjustments to the ERC calculations may be necessary to account for overlapping pay periods that were in the PPP loan covered period.
Are all payroll costs reported in my PPP loan forgiveness application (form 3508 or 3508EZ) ineligible for ERC purposes?
Not necessarily. Only the minimum portion of these payroll costs needed to achieve 100% forgiveness needs to be excluded for ERC purposes. If there is overlap, the excess portion of the payroll costs that was not necessary to achieve 100% forgiveness can be clawed back and repurposed for the ERC regardless of whether your PPP loan forgiveness application has previously been submitted.
How long does it take to receive ERC refunds?
Refunds can take from six weeks to nine months. Some refunds may include interest, if there was an overpayment of payroll taxes in the initial 941 filing.
How can I get assistance with determining ERC eligibility, calculating the magnitude of the ERC, and filing the necessary paperwork to receive the ERC refund checks?
Weaver can handle your ERC consulting and processing needs. Contact us for advice and assistance regarding any of your ERC or PPP loan forgiveness needs.
Authored by Beau Butler and Alex Tittel.
