Q & A:

QUESTION

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Q:    Can my company still qualify for the Employee Retention Tax Credit in 2021?

—Curious CFO

ANSWER

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A:     Dear Curious:

The Employee Retention Tax Credit (ERC) is a fully refundable tax credit created in 2020 to encourage businesses to keep employees on their payroll during the pandemic. The ERC has gone through multiple changes over the last two years, and while the program ended for most companies on Sept. 30, 2021, some businesses may be able to retroactively claim the credit.

In order to qualify for the latest version of the ERC, a business must have experienced one of the following two circumstances between March 13, 2020 and Sept. 30, 2021:

1) Gross receipts declined more than 50% in any quarter of 2020 compared to the same quarter of 2019 or declined more than 20% in any quarter of 2021 compared to the same quarter of 2019; or

2) The company had to fully or partially suspend operations due to a government order related to COVID-19.

Businesses that want to apply for the ERC retroactively will need to amend prior years’ tax returns to adjust their payroll expenses. You have up to three years to claim the ERC for prior quarters. Meet with your Family Business Lawyer™ to gain clarification on the program and support you with your application.