Think you do not qualify –look again! The qualifications have changed!!!

By Julie Steinbacher

What You Need to Know About the Employee Retention Credit (ERC)Qualification Available to all employers regardless of size including tax exempt organizations.

There are exceptions:

  • state and local governments and their instrumentalities and
  • small businesses who take Small Business Loans

To qualify, the employer has to meet one of two alternative tests. The tests are calculated each calendar quarter:

  • either the employer’s business was fully or partially suspended by government order due to COVID-19 during the calendar quarter -this could include the suspension of travel, group meetings or commerce OR
  • the employer’s gross receipts were below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019 they no longer qualify after the end of that quarter

Any interruption of business directly resulting from federal government order during 2020 or 2021 may qualify. The requirement to wear masks within the workplace does not qualify a business. Adjustment of business hours during a stay-at-home order do not qualify a business.

Supply chain disruptions do not qualify unless they directly resulted from a government order and met all of the following requirements:

  • Supplier cannot make deliveries of critical goods due to a government order
  • Business can’t purchase those critical goods from another supplier
  • Business must experience a more than nominal effect as a direct result

Salaries of majority owners and their families cannot be included in the ERC calculation. If the business owner has any living relatives than none of the salaries are eligible. Businesses that received PPP can apply for the ERC as long as the same salaries are not used and the business qualifies for the ERC.