Availability of the ERC Credit

1. The credit is available to all employers regardless of size including tax exempt organizations. There are only two exceptions: (1) state and local governments and their instrumentalities and (2) small businesses who take Small Business Loans
2. To qualify, the employer has to meet one of two alternative tests. The tests are calculated each calendar quarter – Either
   1. 1. The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter or
      2. The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019 they no longer qualify after the end of that quarter.

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Calculation of the Credit

The amount of the credit is 50% of the qualifying wages paid up to $10,000 in total. It is effective for wages paid after March 13th and before December 31, 2020. The definition of qualifying wages varies by whether an employer had, on average, more or less than 100 employees in 2019

• Less than 100. If the employer had 100 or fewer employees on average in 2019, then the credit is based on wages paid to all employees whether they actually worked or not. In other words, even if the employees worked full time and got paid for full time work, the employer still gets the credit.
• Greater than 100. If the employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.

In both cases, “wages” includes not just cash payments but also a portion of the cost of employer provided health care. Payment Employers can be immediately reimbursed for the credit by reducing the amount of payroll taxes they have withheld from employees’ wages that they are required to deposit with the Treasury.

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Most Misconceptions About ERC

• My company doesn’t qualify for ERC because it remained open during the pandemic
• The IRS allows numerous circumstances for eligibility based on a “disruption of typical business operations” such as capacity limits, seating distance requirements, etc.
• My company took advantage of the PPP and does not qualify
• Most of the companies we help receive the ERC also received PPP.
• My company is a non-profit organization and we do not qualify
• The ERC applies to for-profit and non-profit businesses alike.
• My company was an “essential business” and doesn’t qualify
• The ERC provides numerous paths to eligibility including revenue loss or operational impact.
• My company doesn’t qualify since year-over-year sales didn’t decline by 20%
• Although your sales may not have declined, eligibility may still exist based on other qualifications like local or state restrictions.
• The ERC is a loan that I have to pay back
• The ERC is NOT a loan, and you do not have to pay it back. The check you receive from the IRS can be spent for your business needs without restrictions.

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