"The Three Key Criteria for Businesses to Claim ERC."
- Andy Koepke
- Apr 29, 2023
- 2 min read
Updated: May 1, 2023
As the COVID-19 pandemic continues to impact businesses across the country, many are struggling to stay afloat. Fortunately, the federal government has provided relief through programs like the Employee Retention Credit (ERC). This tax credit is designed to incentivize businesses to retain employees during the pandemic, but many business owners are still unsure if they qualify.
To qualify for the ERC, businesses must meet certain criteria. Specifically, there are three categories that a business can qualify for ERC:
50% revenue decrease in 2020 compared to 2019: Businesses that experienced a 50% decline in gross receipts in any quarter of 2020 compared to the same quarter in 2019 are eligible for the ERC. This decline can be quarter-over-quarter and not necessarily year-over-year. In other words, a business that experienced a 50% decline in Q2 2020 compared to Q2 2019 would be eligible for the ERC.
20% revenue decrease in 2021 compared to 2019: Businesses that experienced a 20% decline in gross receipts in any quarter of 2021 compared to the same quarter in 2019 are eligible for the ERC. This decline can be quarter-over-quarter and not necessarily year-over-year. In other words, a business that experienced a 20% decline in Q1 2021 compared to Q1 2019 would be eligible for the ERC.
"Operational Disruption Due to Government Order" or "Business Disruption as a result of COVID": Businesses that were fully or partially suspended due to government orders related to COVID-19 are eligible for the ERC. This category is broader than the first two and includes businesses that were directly impacted by the pandemic but did not necessarily experience a decline in revenue.
It's worth noting that businesses can qualify for the ERC retroactively, which means that businesses can claim the credit for all eligible quarters in 2020 and 2021.
The ERC can provide a valuable lifeline to businesses struggling during the pandemic, and it's important for eligible businesses to take advantage of the credit.
