EMPLOYEE RETENTION CREDIT 2022 ELIGIBILITY

Find out if you qualify

By Genny A. Castellanos, Esq. and Matthew Andrews, Esq.

More than likely your business qualifies for the ERC even if it did not experience a drop in revenue. Things that qualify you for the ERC include:

• Supply chain disruptions

• Federal, state, or local mandates required your business to fully or partially shut down

• Limitations on the number of people you could have in a room or building

• Inability to attend normal networking events

• Disruptions to your sales force’s ability to function normally

• Limited capacity to operate

• Inability to work with vendors

• Reduction to the services or goods offered to customers

• Reduction to the hours of operations

• Shifting of hours of operations to increase facility sanitation

• Delayed or canceled projects due to Covid related disruptions

On April 28, 2022, the Business Journal confirmed that businesses can still apply for Employee Retention Credit. 1-2

Several business owners are not aware that their business may qualify for Covid-19 relief funding. The Employee Retention Credit provides business owners with another avenue for funding alternative Paycheck Protection Program.

What is Employee Retention Tax Credit?

A refundable federal tax credit that businesses can claim on qualified wages, including other expenses and costs paid to employees. The credit repays a portion of wages paid by employers impacted by the COVID-19 pandemic. The IRS will send your business a check for the amount you qualify to receive.

Who qualifies?

The credit can be claimed by businesses, including colleges, universities, hospitals, and 501(c) organizations with 500 or fewer full time equivalent employees that meet the qualification criteria. The qualification criteria the employer must show is that it had:

1. partially or fully suspended operations due to a government order or

2. can meet the criteria of the economic test.

Note: Only full time employees (30+ hours a week) count toward the 500 employee limit; part-time employees do not count toward the limit. If you have more than 500 employees you may still qualify when the actual hours worked are evaluated.

Is it too late to apply?

Businesses can retroactively claim the credit for up to three (3) years. Businesses can perform a look-back to determine if wages they paid after March 12, 2020, through the end of the program are eligible for a refund.

What wages can be refunded?

Wages and benefits that are subject to FICA taxes and other expenses paid after March 12, 2020, can qualify for the credit if paid through September 30, 2021.

How much is my business claim worth?

Businesses can receive up to $26,000 per employee with the average award being around $16,000 per employee.

How much will this cost?

We work on a contingency fee basis. Your company will pay nothing until and unless your company is paid. At the time the calculation is submitted to the IRS an invoice will be generated to your company which is due upon payment of the credit to your company. If your company is not paid, then your company owes nothing.

What is the process and how long will it take?

The filing process depends on how quickly information is gathered by you, your accountant, or an attorney assisting you but in general, takes 4 to 6 weeks to properly evaluate qualification and calculations of the amount to be claimed. Once the amended tax forms are filed, the IRS may provide the credit within 6-12 months depending on their processing time. On average payment is taking place within 8 months of the filing date.

References

1. The Business Journal, Andy Medici, Senior Reporter, The Playbook, Apr 26, 2022, Still searching for Covid-19 relief funding? Here’s what to know about ERC. (available at https://www.bizjournals.com/bizjournals/ news/2022/04/26/can-i-still-claim-the-employee-retentio n-credit.html)

2. Employee Retention Credit, Internal Revenue Service (available at https://www.irs. gov/coronavirus/employeeretention-credit)