A Business Owner’s Guide to Employee Retention Credits

The pandemic of 2020 left many business owners in dire straits. Many saw their companies struggle or shut their doors entirely. The fallout of the pandemic and subsequent recession has been hard on businesses and still is. If you’re looking for some sense of relief, there’s a chance you qualify for government money just for making it through it all with your sanity intact (and the sanity is optional).

Lift HCM is a specialist in managed payroll services. We’ve helped our clients navigate the chaos by taking advantage of powerful tax incentives like Employee Retention Tax Credits (also known as “ERC” or “ERTC”). These are refundable tax credits for employers (both businesses and tax-exempt) affected by the pandemic in any way. Let’s dive into the details to see if you still qualify for ERTC in 2023.

Who Qualifies for ERTC in 2023?

The first stimulus package presented business owners with an “either/or” situation. You could either get the PPP loan or you could get the ERC credit. Everyone said,

“I can spend money to get a tax credit without knowing how long it'll take to get anything in return or I can take this massive loan and have it all forgiven.”

Then they thought about it for three seconds and chose the latter.

The government cast a broad net when determining eligibility requirements for ERTC. You generally qualify for a tax credit if you paid wages to employees between March 12, 2020 and January 1, 2022 and...

• Experienced a decline in gross receipts or
• Qualified as a recovery startup business for the third or fourth quarters of 2021 or
• Had to shut down due to government order during 2020 or the first three quarters of the 2021 calendar year (this hit the restaurant and hospitality industry hard).

So, what is a “recovery startup business”, you ask?

• Did you have under $1 million or less for three years preceding the quarter you filed your claim?
• Were you in business before February 15, 2020 (which, as far as ERC is concerned, was the day feces met fan)?

That’s you.

So, Who Doesn’t Qualify for ERTC?

Who doesn’t doesn’t get the tax credit? Well, let’s start with our usual suspects.

• You’ve got your average Joseph Schmo; no employees, business, or idea what he’s doing (just a big fan of free money).
• Retirees are out (out living their best lives, but out).
• Employees don’t get a kickback (but maybe toss some cookies in the break room).
• Government agencies aren’t invited to the party (and you know how fun they are at parties).

After that? Things get interesting…

• Employers who didn't pay wages in the timeframe needed to qualify for ERC (because, duh).
• Employers who had supply chain disruptions without having to suspend their staff due to government order and can’t prove a decline in gross receipts.

The truth is that a good amount of employers qualify for a credit. Question is, do you have the paper trail to prove it?

Calculating ERC

If you find that you are eligible for ERC, you must be able to show the following:

• In 2020: your total revenue must be ≤ 50% lower than the corresponding quarter in 2019.
• In 2021: your total revenue must be ≤ 20% lower than the corresponding quarter in 2019.

Need a Lift With Employee Tax Credits

To claim retention credits on your employees, you’ll need to submit Form 941. Calculating your payout on that form can be a meticulous process. You’ll need to comb through your sales and expenditures to learn how much you qualify for.

Now, normally, this is where we’d link you to some resources on explaining what Form 941 is and how to accurately fill it out to claim ERC on your own. In fact, here you go. Good luck and godspeed. 

As much as we want to be impartial and objective in sharing this knowledge with you, navigating the ERC system is really hard.

If you need a nerd to comb through your receipts and get you the maximum possible amount in employee retention tax credits, this is Chuck. Chuck is Lift HCM’s Payroll Service Manager. Here he is explaining ERC qualifications to our content manager (whose eyes went crossed and nose started bleeding 20 minutes into the call). ERC is Chuck’s Superbowl. 

He’s the reason Lift HCM has helped its clients earn over $100 million in employee retention tax credits to date.

If you’re interested in claiming employee retention credits and having a payroll expert like Rain Man here pour over your earnings and expenditures, schedule a call with our business development managers today to get the ball rolling.