Many businesses and organizations have either not applied for, think they don’t qualify for, or have never heard of the Employee Retention Credit (ERC). The ERC is a COVID-19 related relief program designed to encourage employers to keep employees on payroll throughout and after the pandemic. It provides eligible employers a refundable payroll tax credit of up to $26,000 per employee for qualified wages paid from March 13, 2020, through September 30, 2021.
The Janover team has helped businesses claim more than $50 million in ERC funds to date. We can help you assess your eligibility, learn more about the credit, and ensure you receive each and every dollar of relief you are eligible for.
Businesses, including nonprofits, that experienced one of the following events may be eligible for the ERC:
- A full or partial suspension in operations because of orders from the federal government, or a state government having jurisdiction over the employer, limiting commerce, travel, or group meetings related to COVID-19, or
- A significant decline in gross receipts, defined as 50% during any quarter in 2020 compared to the same quarter in 2019 or a 20% decline in 2021 compared to the same quarter in 2019.
Here are four examples of organizations, from a large multilocation retailer to a small single-location restaurant, Janover has worked with to claim the ERC.
Large Retailer Claims Nearly $5M in ERC for 2021 Q1-Q3
A New York retailer with nearly $30 million in pre-pandemic annual sales experienced a 50% reduction because of the pandemic. With more than 15 locations, nearly 1,000 employees, and a large accounting team, including external consultants, the retailer was unaware the credit existed.
While the company employs 1,000+ individuals, many are part-time given the nature of the retail industry. The 2021 ERC is limited to only those businesses that averaged 500 or fewer full-time employees during 2019. After crunching the numbers, it was discovered only 300 of those employees would be considered “full-time” under IRS guidance.
The retailer, which started exploring the ERC in late August 2021, ended up qualifying for a cash refund of more than $5 million for 2021.
Real Estate Broker Picks Up $600K for 2020 and 2021
The pandemic hit nearly all industries, especially those in real estate. A California-based real estate broker with 30-40 employees had a down year. While the company did receive a Paycheck Protection Program (PPP) loan, they didn’t think they qualified for any other COVID relief.
Based on the original ERC rules, businesses that received a PPP loan were ineligible for the ERC. Subsequent changes to the regulations in late 2020 and early-2021 retroactively allowed businesses to claim the ERC as long as they did not use those same wages for PPP forgiveness. The company’s outside consultants, who did not keep up with the changing rules and ultimately forgot about the program, did not know about the retroactive changes, and never brought the ERC to their client. After engaging Janover, it was determined the company qualified for more than $600,000 between 2020 and 2021.
Local Restaurant Qualifies for $150,000 for All of 2020, 2021 Q1-Q2
A local, single-location restaurant/pub with a sole practitioner wasn’t aware the ERC existed. While the restaurant, which has annual revenues of almost $2 million, had a decent year despite the pandemic, the 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.
With just 15 employees, the restaurant qualified for – and will claim – $150,000 in ERC tax credits for all of 2020 and the first and second quarters of 2021. That’s almost 10% of its annual revenue!
Community Services Nonprofit Receives Nearly $1M in ERC Relief
The PPP loan forgiveness process was, and continues to be, a challenge for many organizations. Making sure the same wages weren’t used to claim the ERC and PPP forgiveness calculations further complicated things. Of course, that assumes a business is even aware of the ERC. A regional nonprofit that provides critical community services with nearly 60 employees did not.
After sorting through the paid wages in the PPP forgiveness process, the nonprofit 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.
Qualify and Apply for Your ERC Funds Today!
Under the initial rules set forth in the CARES Act, businesses were only eligible to claim the ERC if they averaged fewer than 100 full-time employees in 2019, and they could not claim the ERC if they obtained a PPP loan. Subsequent updates to the ERC under the Consolidated Appropriations Act, 2021 and The American Rescue Plan Act, signed into law December 27, 2020, and March 12, 2021, respectively, greatly expanded the eligibility of the ERC. Among many other changes, these expansions now allow employers that averaged fewer than 500 full-time employees to claim the credit for 2021 and retroactively allow eligible employers that received a PPP loan to claim the ERC for 2020 and/or 2021. Click here to review a webinar on the recent ERC changes.
“Businesses generally rely on information provided to them by their accountants, advisers, and attorneys. If they or their professionals don’t know the program, most business owners are just making an assumption they don’t qualify,” said Janover Partner Anthony Napolitano CPA.
Take note, though, there is a backlog for amended claims from 2020, and pending legislative matters could impact ERC payouts. Click here to start the process sooner than later to get COVID relief.