What Are the Steps to Check ERC Eligibility?


So, you've heard about the Employee Retention Credit (ERC) – that nifty tax credit here to give businesses a helping hand during tough times like the pandemic. We've got your back if you're a business owner wondering if you're eligible for this credit. Here's a simple ERC credit of the steps to check if you qualify.

Step 1: Get the Basics Right 

First, let's ensure you're in the right ballpark. Here are the key points to keep in mind:

  • Who Can Apply: This credit isn't picky – it's up for grabs for both for-profit and nonprofit employers, including those tax-exempt organizations.

  • Being in Business: Your business should have been up and running during the year you claim credit. If you started in 2020 or 2021, that's cool too.

  • Money Talk: There's got to be a dip in your revenue. For 2020, your revenue should have dropped by at least 50% compared to the exact quarter in 2019. In 2021, the bar is set at 20%.

  • Government Steps In: If your business got caught up in a government-mandated shutdown, you might be eligible for the credit – no revenue decline required.

Step 2: Get Your Financial Ducks in a Row 

You'll need to do some number-crunching. Here's what you should have on hand to check ERC eligibility:

  • Receipt Roundup: Collect all your gross receipts for each quarter in 2019, 2020, and 2021. These will help you figure out that revenue decline.

  • Shutdown Papers: If your business faced a shutdown ordered by the government, gather up any paperwork – like orders or notices – that backs up your claim.

Step 3: Crunch Those Numbers 

It's time for a little math action. Calculate that revenue decline like this:

  • 2020 Check: Compare your gross receipts for each quarter in 2020 to the same quarters in 2019. If you find a drop of 50% or more in any of those quarters, you could be in the running for the credit for that quarter.

  • 2021 Twist: Same deal, but the decline only needs to be 20% this year.

Step 4: Maximize the Credit 

The credit amount hinges on the wages you paid your eligible employees. The top credit amount per employee is $7,000 per quarter for 2020 and $10,000 for 2021. To find that maximum credit, multiply the wages that fit the bill by the credit rate. For 2020, the rate is 50% of the qualified wages. In 2021, it's 70%.

Step 5: Bring in the Pros 

While we've got the basics here to check ERC eligibility, remember it's always a good idea to chat with a tax pro or an accountant. They're like the sheriffs of tax town, helping you navigate the specific rules and math. They'll ensure you're not missing out on anything and help you maximize employee retention credit.

The Bottom Line 

The Employee Retention Credit is like a tax superhero that's got your back when times are tough. By knowing the ropes and following the steps from this ERC credit, you can determine if your business can claim this credit. Remember – tax stuff can get tricky, so don't hesitate to bring in a pro to help you. They'll ensure you're dotting your i's and crossing t's while making the most of the ERC offers.
Location: United States

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