Can You Still Receive an Employee Retention Credit for 2023?
The Employee Retention Credit (ERC) was implemented in 2020 as part of the CARES Act, and benefited both employers and employees by rewarding businesses with a refundable tax credit for keeping workers on the payroll despite business downturns. Most businesses now have more or less returned to normal operations, and required business closures and restrictions for COVID-19 abatement have been lifted in most areas. This has led many business owners to wonder if they can still claim an ERC on their tax returns in 2022. Keep reading to learn more about the ERC, the time periods it applied to, and how to claim your business’s credit.
Claiming the ERC in 2023?
When it comes to claiming the ERC in 2022, it’s important to note that we’re not talking about claiming a credit for the 2022 tax year. Rather, we’re talking about claiming a missed credit from 2020 or 2021. The ERC ended with the 2021 tax year, so employers can no longer qualify to receive it. However, if you missed out on the credit in past tax years for any reason, or if you extended your tax return for 2021 and have yet to file, you can still claim your ERC for applicable quarters.
Applicable Time Periods and Percentages
The ERC was initially implemented in March of 2020 and is scheduled to expire at the end of the year. However, it was extended twice via the Consolidated Appropriations Act for the first two quarters of 2021, then extended an additional quarter through the American Rescue Plan. Through each of these plans, the exact amounts that employers could claim varied:
- CARES Act – The CARES Act implemented the ERC on March 12, 2020, with an expiration date of December 31, 2020. For this time period, businesses could claim a refundable tax credit against 50% of qualified employee wages, with an annual maximum of $10,000 for each eligible employee.
- Consolidated Appropriations Act – The Consolidated Appropriations Act extended the ERC for the period of January 1, 2021, through June 30, 2021. In this time period, qualifying employers could receive a credit against 70% of qualified wages, with a maximum credit of $10,000 per quarter for each qualifying employee.
- American Rescue Plan – The ARP extended the ERC once more, giving most businesses an additional quarter to claim this credit. However, some companies could qualify to receive the credit through the end of 2021. For this time period, the credit could be claimed against 70% of qualified wages, with a maximum credit of $7,000 per quarter for each employee.
If you missed out on claiming your ERC, it’s important to know these varying percentages and maximum credit amounts so that you can claim the full amount you deserve.
What Businesses Qualify for the ERC?
Qualifying for the ERC has less to do with the type of business you own and more to do with just how much the pandemic impacted your business. In fact, the ERC is available to almost all private-sector employers, as well as universities, colleges, hospitals, and 501(c) organizations. To prove eligibility, you must show that your business was in operation during any of the above-mentioned time periods, and be able to show via gross receipts that your profits and operations were severely impacted by COVID-19.
You can prove this by calculating your gross receipts in each quarter as compared to your gross receipts in the same quarter of 2019. If your gross receipts in an applicable quarter are below 50% of gross receipts in the same quarter of 2019, you would qualify for the ERC, unless the gross receipts for the next quarter exceeded 80% of the same 2019 quarter.
What If You Received a PPP?
When the ERC was initially implemented, businesses could not receive the ERC if they received a PPP loan. However, this changed, and businesses were permitted to retroactively claim those credits for any quarters in which they qualified. If you missed out on the opportunity to receive your ERC because you did not believe you could receive one due to your PPP loan, you can amend your 2020 return and receive those credits now.
If you believe you qualified for an ERC in 2020 or 2021 and you did not receive it, there’s still time. Contact Demian & Company, CPAs, to get the help you need in calculating your gross receipts and filing your taxes or amending a past tax return that includes your Employee Retention Credit. Call now to schedule a consultation with a CPA.