ERTC Eligibility Explained — Startups, New Businesses & Non-Profits
If you’re a little confused about the Employee Retention Credit program, you’re not the only one.
It’s not unusual for government programs to be a little confusing, but in this case, the entire program was redesigned halfway through — and many employers aren’t aware of the new rules.
That’s no reason to leave money on the table though — if you’re running a small business, a new business, or even a not-for-profit organization — you’re probably eligible for tax credits.
Read on to learn about the changes that were made when the Consolidated Appropriations Act was passed, and the amendments it made to the CARES Act — or take a short quiz that can determine your eligibility in about 60 seconds.
What Kind Of Businesses Are Eligible?
After all the changes and amendments, it turns out that just about everyone can qualify for tax credits, assuming they operate a small business of any kind and suffered some kind of losses due to the pandemic.
This includes any business with less than 500 average full-time staff for 2021, or less than 100 average full-time staff for 2020.
Colleges, universities, hospitals, and 501(c) businesses can also qualify.
What Kind Of Loss?
There are a couple of ways to be eligible due to a loss — the simplest way is to show that your business was closed at some point due to a lockdown, by official government order.
If your business happened to escape the lockdowns, you can still be eligible based on financial losses as shown in your gross receipts, compared to the same quarter of the previous year.
As a new business, it would be impossible for you to show a loss compared to the previous year, so different rules apply.
If your business was started after February 15, 2020, and has gross receipts of under $1 million, then you qualify as a Recovery Startup Business.
Not only do you not have to show a loss to receive your tax credits, but you’re also eligible for tax credits in Q4 of 2021.
This is the only kind of business eligible for tax credits for wages paid during Q4 of 2021.
What About PPP Loans?
Did you already take a PPP loan, and now you’re concerned that it means you are not eligible for ERTC?
Not to worry — while that was originally part of the regulations, it was one of the first things to change.
Any employer who received a PPP loan may also apply for ERTC, and since most of the same eligibility requirements apply to each program, if you’re eligible for PPP, you’re almost certainly eligible for ERTC.
Is It Too Late To Claim Your Tax Credits?
Not at all.
You can still claim your credits for 2020 and 2021, even if you’ve already filed.
To make a claim, just fill out a 941-X form to amend your file, or contact an ERTC specialist who can help you to get the paperwork in as soon as possible.
Just don’t wait too long — with more businesses filing every day, the wait time to get rebates has been increasing.
The sooner you file, the sooner you’ll get your rebate.