Employee Retention Credits (ERC)
It’s not too late to file for an Employee Retention Credit (ERC). At TruSpan we are ERC specialists and can help you file for the credit. Even if you received a PPP small business loan, you may still qualify for this cash credit created by the US Government for small businesses. If you are under 500 employees and suffered a reduction in sales or were materially impacted by COVID-19 in 2020 or 2021, you should evaluate whether you qualify.
The credit is up to $5,000 per employee for 2020 and up to $28,000 per employee for 2021. These are not tax credits, they are cash funds provided directly to you to support your business and support employee retention. Unlike a PPP small business loan, the ERC Is not a loan and does not need to be paid back or forgiven.
TruSpan can review your situation and assess whether you may qualify for the ERC program. We are CPAs and ERC specialists, with experience in tax filings and understand how difficult it is to interpret IRS forms on your own.
There are many companies out there that provide this service. You should ask them if they are CPAs and what their fees are for filing the ERC on your behalf. Most firms will charge you a 20% fee to process the ERC applications and will often require that you pay the entire fee before they submit the application. Forcing you to wait up to four months to recoup the fee.
TruSpan is transparent. Our fee structure is only 12% of the gross credit you file for, with only $2,500 due at submission. The remaining fee is collected when you receive your credit. We want to be your partner in both the ERC process and into the future.
Program developed by the US Federal Government to help small businesses retain employees during the COVID-19 pandemic. It provides a cash credit for employers who were impacted in 2020 or 2021 due to government shutdowns, supply chain issues, lost revenue, and office closures.
The credit is calculated for each payroll quarter during 2020 and 2021 separately.
For 2020 the credit is 50% of each employees’ payroll for the year but it is capped at $10,000 per year. So, the credit is essentially $5,000 per employee per year.
For 2021 the credit is 70% of each employees’ payroll for the year but it is capped at $10,000 per quarter. So, the credit is essentially $28,000 per employee per year.
The easiest way to qualify is based on a decline in gross sales. If your sales for any quarter in 2020 declined more than 50% for the same quarter in 2019 or if your sales declined by more than 20% for any quarter in 2020 you qualify for that quarter.
You can also qualify if your business was materially impacted by government closures, supply chain issues due to government closures, closed offices, other COVID related issues as a result of closures and orders.
You file an amended 941-X for each quarter in which you were impacted. This form is an IRS form which amends your quarterly payroll tax filing. The calculations based on the information and documentation above are prepared. The 941-X form is then filed with the IRS.
You have five years from the date of the original 941 quarterly filing to correct your filing. Any credit funds you receive are income to you and will be reported on your federal income tax return for the business and will be taxed.
You can still apply for ERC credit even if you received a PPP small business loan. You cannot “double dip” so you would not be able to claim the ERC credit for those payroll cycles in which you used the PPP Loan to support payroll for your employees.
How Long does it take to receive the credit?
The IRS is pretty backed up in filings, however the general guidance is that you may receive your credit within four to sixteen weeks.