Debunking the myths of ERC and throwing light on the facts

It is utterly surprising to see the large numbers of employers and business organizations that still think that they can’t even qualify for Employee Retention Credit or the ERC. The ERC is a redeemable tax credit for employers that have been introduced by the CARES Act. This credit can be utilized to offset the taxes paid by the employer and receive financial assistance during the coronavirus pandemic. 

This is nothing but an incentive for businesses to retain their staff and employees. The ERC pays for the employer costs while ensuring the jobs are preserved for the employees. Click here to learn more on how to calculate ERC. In this article, we’ll debunk a few ERC myths. 

Myth #1: I can’t qualify for ERC if I already claimed PPP

No, you needn’t worry as now you are allowed to claim both. According to the Consolidated Appropriations Act (CAA) of 2021, the limitation on claiming only one or the other has been eliminated. PPP only accounts for 2.5 times your payroll costs in a month and this can spread over a span of 6 months. 

Myth #2: There was no 50% drop in gross receipts in my business

The CAA has brought about a change in eligibility criteria and according to the new changes, even a drop of 20% will qualify. However, you have to remember that the other way of qualifying for ERC is by proving that your business went through full or partial suspension.

Myth #3: My business didn’t close down during pandemic

Did you know that even a partial suspension ordered by the federal, local, or state government could make you qualify? For example, sudden disruption of your business, a shutdown, incapability to access machines and equipment, a shutdown of vendors or suppliers, reduction of services offered, and shutdown of a few members of a business are all situations that will make you qualify. 

Myth #4: My company is an essential business and hence I can’t qualify

Even though your business is considered an essential service, even the slightest impact of pandemic could let you qualify. You might have been open but your vendors and suppliers were shut down and you couldn’t visit the client’s site. This could make you qualify. 

If you have been believing in any or all of the above-listed myths, you should start realizing the facts related to each misconception.