Employee Retention Credit
Businesses across the country and around the globe have faced unique challenges during the COVID-19 pandemic. The Employee Retention Credit (ERC) is a program created under the CARES ACT designed to encourage businesses to maintain their staff throughout this economic disruption. The ERC allows businesses to claim a cash refund of up to $26,000 per employee for qualified wages paid from March 13, 2020 through September 30, 2021.
Generally business that experienced either of these qualifying events may be eligible to claim the ERC:
A full or partial suspension of operations
due to orders from the federal government, or a state government having jurisdiction over the employer, limiting commerce, travel, or group meetings related to COVID-19.
A significant decline in gross receipts
defined as a 50% reduction in revenue during any quarter in 2020 compared to the same quarter in 2019, or a 20% reduction in revenue in any quarter of 2021 compared to the same quarter in 2019.
September 14, 2023: ERC Claim Processing Halted by the IRS
On September 14, 2023, IRS Commissioner Danny Werfel ordered an immediate moratorium on processing new claims for the Employee Retention Credit through at least December 31, 2023. This follows growing concerns about a substantial share of ineligible new claims that are increasingly putting businesses at risk who have been pressured and scammed through aggressive promoters and marketing. The moratorium on processing new claims will allow the IRS to add additional safeguards to prevent future abuse and protect businesses from predatory tactics.
What Does This Mean for You?
- The IRS has put a temporary pause on receiving new ERC claims through at least December 31, 2023.
- If you’ve submitted a claim prior to September 14, 2023 the IRS will continue processing these claims during the moratorium period but at a greatly reduced speed due to the complex nature of the filings and the need to protect businesses from being improperly paid. Normal processing times are expected to stretch to 180 days or longer. The IRS cautions that many applications will be facing additional compliance scrutiny, which means the payments could take even longer to be processed.
- For those considering filing a claim, the IRS urges businesses to carefully review the ERC guidelines during the processing moratorium period. The IRS recommends that businesses seek the help of a trusted tax professional to assist with the filing of the ERC, not a promoter or aggressive marketer.
- The IRS is developing new initiatives to help businesses who found themselves victims of aggressive promoters. This includes a settlement program for repayments for those who received an improper ERC payment; more details are expected to be available in the fall.
- If a business claimed the ERC and the claim has not been processed or paid by the IRS, they can withdraw the claim if they now believe it was submitted improperly – even if their case is already under audit or awaiting audit. The IRS is expected to release more details on this shortly.
- You should review the IRS list of red flags to help you be aware of aggressive marketing and questionable ERC claims and avoid falling victim to a scam.
For questions or more information, please see the official IRS statement or contact your Janover professional.
April 18, 2022: ERC Failure to Pay Penalty Relief Update from the IRS
The IRS has issued comments in response to taxpayer requests for failure to pay penalty relief related to ERC income tax liabilities (IR-2022-89). Learn more here.
April 14, 2022: IRS Provides Status of ERC Refund Timing
If you are still waiting for your ERC refund, you’re not alone. While the IRS is still working on processing existing claims (some dating back to 2020), IRS Commissioner Charles Rettig recently told House members in a hearing that the IRS expects its backlog of unprocessed work to be complete by the end of 2022. Learn more here.
February 11, 2022: Congress Introduces the ERC Reinstatement Act
A bipartisan group of Members of the Senate Finance Committee have introduced legislation to reinstate the ERC for the fourth quarter of 2021. It currently ends after the third quarter of 2021. Check back for continued updates.
The Infrastructure Investment and Jobs Act, signed into law on November 15, 2021, repealed the fourth quarter ERC, thereby making wages paid after September 30, 2021 ineligible for the credit, except for wages paid by an eligible recovery startup business.
The program originally was scheduled to run through the fourth quarter of 2021. That means qualified businesses will only be able to claim a maximum of $26,000 per employee in total for 2020 and the first, second and third quarters of 2021. Previous legislation, which included the fourth quarter of 2021, afforded up to $33,000.
Recent legislative changes have made the ERC available to businesses that have received a U.S. Small Business
Administration Paycheck Protection Program (PPP) loan, which reversed previous rules that excluded you from claiming the ERC and accepting a PPP loan. Combining the two can help alleviate your concerns about managing costs to keep your operations – and employees – in place for the long haul.
- Calculation of the credit and preparation of ERC summary package
- Preparation of payroll tax return amendments and other supporting documentation to claim the ERC
- Identification and assistance in determining eligibility
- Analysis to ensure wages used to claim the ERC do not conflict with PPP Forgiveness wages, per IRS guidelines
Multi-location retailer claimed
A New York retailer with nearly $30 million in pre-pandemic sales experienced a 50% reduction due to the pandemic. With 15 locations and nearly 1,000 employees, the Janover team was able to help this retailer claim nearly $5M in funding.
Real estate broker picked
A California-based real estate broker with 30-40 employees qualified for a PPP loan in 2020. Because they were not up-to-date on changing regulations that retroactively allowed PPP recipients to also claim ERC funds, they were not aware this was an option for them. Janover determined the company qualified for $600K in funding.
A regional nonprofit that provides critical community services with nearly 60 employees was able to collect about $200,000 in ERC relief for 2020 and nearly $700,000 for the first two quarters of 2021, with more to come for the third quarter of 2021.
Local restaurant qualified
A local, single-location restaurant/pub with an annual revenue of almost $2 million was able to claim $150K in ERC funding. Government-mandated reduction in indoor dining seating capacity made it eligible to apply for the ERC despite not meeting the “significant decline” in gross receipts threshold.
A construction company with 3 affiliated entities and about 300 employees was able to collect $4.5M in ERC funding after experiencing a gross receipts decline in 2021.
Law firm received
A New York City-based law firm with about 50 employees experienced a partial suspension of operations due to court closures in 2020 and gross receipts decline in 2021. After partnering with Janover, they were able to claim $1.2M in ERC funding.
Get Started Today
Janover has a team of advisors and consultants at the forefront of ERC, PPP, and other CARES Act programs. We continue to monitor ERC and all-new guidance from Congress, the IRS, the SBA, and the Treasury. Please complete the form below so we can help guide you through the ERC process.