It's Your Money. Has your eligibility changed since you last investigated?

Dave Albrecht • Apr 11, 2023

Employee Retention Tax Credits and Your Business - Did Your Status Change?

What is causing you to believe your business doesn't qualify for Employee Retention Tax Credits (ERTC)? Were you aware the requirements and boundaries changed several times over a few years. What you thought your knew may have been correct at a point in time, but may now be out of date.


As a small or mid-size business owner, you are always looking for ways to reduce your tax liability and increase your financial leverage. One powerful tool that you may not be aware of is the Employee Retention Tax Credit (ERTC). This credit is still available to businesses that were impacted by the COVID-19 pandemic, and it can provide significant benefits to qualifying businesses.


The ERTC requirements and eligibility changed many times from 2019-2021. I have found that many many businesses and professionals who thought they did not qualify, were not aware of changes to the requirements over time. And now their business is eligible for this for these tax credits. I recommend you consult with a tax credit specialist.


The tax credit was designed to incentivize businesses to retain their employees during the pandemic by offering a tax credit of up to $26,000 per employee for impacted periods between March 2020 and September 30, 2021. The ERTC was introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020. It was later extended and expanded under the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021.

To qualify for the ERTC, your business must have experienced a decline in gross receipts of at least 20% in any quarter of 2020 or 2021 compared to the same quarter in 2019. Alternatively, if your business was subject to a government-mandated shutdown or experienced a significant decline in gross receipts due to supply chain disruptions, you may also be eligible.


If your business qualifies for the ERTC, the benefits can be significant. The credit can be used to offset payroll taxes, which can improve your cash flow and financial leverage. In other words, the tax credit helps you to keep more money in your business for either stabilization of the business or to invest it to drive growth and profitability.

For example, let's say your business has 50 employees and qualifies for the maximum credit of $26,000 per employee per quarter. That's a total credit of $1,300,000. You could use the credit to offset payroll taxes, and potentially save hundreds of thousands of dollars in cash flow each year. You could use the money to invest in new equipment, hire additional employees, or expand your marketing efforts, among other things.


The ERTC can also help stabilize your business during uncertain times. By retaining your employees, you can maintain your workforce and ensure that you are well-positioned to capitalize on new opportunities as they arise. Additionally, the credit can help you avoid the costs associated with layoffs and rehiring, which can be significant.


To claim the ERTC, I recommend you talk with a tax credit specialist, which may or may not be your tax preparing professional.


It's important to note that you cannot claim both the ERTC and the Paycheck Protection Program (PPP) loan for the same wages. If you received a PPP loan, advise your specialist to assess the rules to determine the best course of action. However, it's worth noting that the ERTC is often a better option for businesses that have experienced significant revenue declines, as it can provide a larger benefit than the PPP loan forgiveness.


In summary, the Employee Retention Tax Credits can be a powerful tool for small and mid-size business owners looking to reduce their tax liability and improve their financial leverage. By retaining your employees and claiming tax credits, you can stabilize your business during uncertain times, invest in growth and profitability, and potentially save hundreds of thousands of dollars in cash flow each year. If you think your business may be eligible for the credit, it's worth claiming the benefit.

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