Qualifying for the ERC
To qualify for the ERC, businesses must meet certain eligibility criteria. For example, businesses must demonstrate a decline in revenue by comparing their gross receipts in the current quarter to the same quarter in the previous year. Businesses that experienced a decline of at least 20% in gross receipts in 2020 compared to the same quarter in 2019 are eligible for the credit. For 2021, businesses can qualify for the credit if they experienced a decline of at least 20% in any quarter compared to the same quarter in 2019, or if they experienced a decline of at least 20% in annual gross receipts in 2021 compared to 2019.
Additionally, businesses that were fully or partially suspended due to a government order related to COVID-19 may also qualify for the ERC, regardless of whether they experienced a decline in revenue.
It’s important to note that businesses cannot claim the ERC for wages that were paid with funds from forgiven Paycheck Protection Program (PPP) loans. However, businesses can claim the ERC for wages paid with other sources of funds, such as grants, donations, or other loans.
Overall, the ERC provides a significant opportunity for businesses to receive financial relief during these challenging times. If you’re unsure whether your business qualifies for the ERC, it’s recommended to consult with a tax professional to determine your eligibility and maximize your potential credit.