How Businesses Are Getting 6 to 7 Figure ERTC Payments from the U.S. Government

How Businesses Are Getting 6 to 7 Figure ERTC Payments from the U.S. Government

Qualified businesses affected by the pandemic can earn up to $26,000 per employee in Employee Retention Tax Credits. Companies requesting this refundable tax credit for multiple eligible employees are seeing payments in the six to seven-figure range.
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Why businesses are filing for ERTC

  • Employers can earn up to $26,000 per employee with ERTC.

  • ERTC offers a way to recoup a portion of losses incurred due to COVID-19.

  • Companies can receive refunds in the 6 to 7 Figure Range.

  • Retroactive rewards are available for businesses that kept employees despite COVID-19 disruptions.

  • Businesses can use employee retention tax credit refund money to reinvest and expand.

Employee Retention Tax Credit Statistics

  • $10.5 Billion

    The IRS processed $10.5 billion in ERC claims during the first, second, and third quarters of 2020.(1)

  • $7.9 Billion

    The IRS processed $7.9 billion in ERC claims during the first quarter of 2021.(2)

  • $26,000

    Eligible employers who amend their tax returns could receive refunds of up to $26,000 per employee for 2020 and 2021 combined.(3)

What Is the Employee Retention Tax Credit (ERTC)?

What is ERTC? The Employee Retention Tax Credit (ERTC)(4) was established as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES)(5) of 2020. It’s a refundable tax credit, which means businesses don’t have to repay these funds. The goal of the act is to encourage businesses to keep their employees on their payroll despite being forced to shut down, even partially, due to Covid-19 regulations or a significant decrease in sales due to the pandemic.

This credit allows businesses to recoup some of the funds used to pay their employees during this time. For instance, employers can apply for a payroll tax refund on 50% of eligible wages (up to $10,000) from March 12, 2020, to December 31, 2020, per employee. For wages accrued during the first three quarters of 2021, employers can request 70% of eligible wages (up to $10,000) per employee per quarter. The combined maximum total employers can receive in ERTC for 2020 and 2021 combined is $26,000 per employee.

How businesses determine eligible wages depends on the size of the company. For ERTC in 2020, small businesses, or employers with fewer than 100 employees, can include all wages paid, including the wages of those who continued to work through the pandemic. Employers with 100 or more employees can only receive a tax credit on the wages of employees who didn’t work due to Covid-19 regulations or a significant drop in sales. For 2021, the definition of small business changes to include companies with fewer than 500 employees.

Who Qualifies for Employee Retention Tax Credit?

There is no size limit determining what companies are eligible for ERTC. Instead, businesses must meet strict ERTC qualifications to obtain an ERTC tax refund.(6)

There are three main ways businesses can qualify for Employee Retention Tax Credit benefits:

Full or Partial Shutdown

Businesses that were forced to shut down, either completely or partially, due to Covid-19 may be eligible for ERTC funds. For example, if the state or local government issued a shutdown of all nonessential businesses, a shelter-in-place order, or a curfew, many businesses could not open. Additionally, if any business was forced to close in order to clean and disinfect the workplace, it may be able to claim ERTC funds for this timeframe.

Decrease in Earnings

If a business experienced a significant drop in sales due to Covid-19, it might be eligible for ERTC relief. For wages in 2020, businesses with a drop in gross sales of more than 50% from the same quarter in 2019 may qualify for the tax credit. For wages in 2021, this qualifying amount changed. If gross sales were less than 80% from the same quarter in 2019, the business may qualify for Employee Retention Tax Credits.

Qualified Recovery Startup

The American Rescue Plan Act of 2021 makes it possible for qualified recovery startup companies that are not otherwise eligible for ERTC funds to receive these tax credits. A company must have started after February 15, 2020, and not earned more than $1M within the last three quarters. These businesses can request 70% of eligible earnings (up to $10,000) for each eligible employee for Q3 2021 and Q4 2021. However, the maximum benefit for these businesses is $50,000 per quarter.

How to Apply for Employee Retention Tax Credit

To claim ERTC benefits, the business must first make sure it’s eligible for the Employee Retention Tax Credit. Then, the company must determine what wages qualify. For example, whatever wages the company uses when filing for a Paycheck Protection Program (PPP) loan cannot be claimed for ERTC purposes. Additionally, a company with 500 or more employees (or 100 or more when filing for 2020) can only include the wages of those who didn’t work due to Covid-19.

Calculating a company’s ERTC can be quite complex. For this reason, many businesses choose to work with an ERTC company to ensure the calculations are correct and that Form 941-X is completed correctly. These ERTC services can help employers secure the full amount of tax credits they deserve. Working with an ERTC specialist can also help determine eligibility.

Once these calculations are complete, the company should file Form 941-X as an amendment to its 2020 or 2021 filing with its quarterly tax filing.(7)

Frequently Asked Questions

  • For 2020, employers should determine each eligible employee’s earnings up to $10,000 from March 12, 2020, to the end of the tax year. Then, multiply this number by 50% for each employee. For 2021, employers should determine each eligible employee’s earnings up to $10,000 for Q1, Q2, and Q3 separately. Each quarter’s total can be multiplied by 70%.

  • For employers with fewer than 100 employees in 2020 or 500 employees in 2021, qualified wages include all wages incurred for any eligible period. For employers with 100 or more employees in 2020 or 500 or more employees in 2021, only the wages of those employees who didn’t work due to Covid-19 qualify for ERTC tax credits.

  • Businesses can contact the IRS at 1-800-829-4933 to track the status of any refund with the government, including the ERTC refund.(9)

  • Businesses should expect to wait at least 6 to 12 months before expecting their ERTC refund check.

  • The American Rescue Plan Act was enacted in 2021 to provide relief to businesses and citizens and to stabilize the economy. It also extended ERTC credit to September 30, 2021, and added assistance for qualified recovery startups through December 31, 2021.(10)

  • The government enacted the Coronavirus Aid, Relief and Economic Security Act in 2020, to provide financial aid to those most affected by the pandemic, including individuals, families, and businesses.(11)

  • Eligibility for the payroll tax refund program includes businesses forced to shut down due to governmental Covid-19 restrictions and saw a significant drop in sales from 2019 to 2020 or 2021. Qualified recovery startups are also eligible.

  • To claim ERTC credits, businesses must first calculate the exact amount of qualified tax credits. Then it must also complete an amended Form 941-X(12) for each qualifying quarter.

  • ERTC stands for the Employee Retention Tax Credit. It was established as part of the CARES Act to help bring financial support to businesses impacted by Covid-19.

  • Employers can choose to work with an ERTC accounting firm to file an amended 941-X by completing all necessary sections.(13)

  • The Employee Retention Tax Credit allows employers to receive a refundable tax credit to cover some of the funds for retaining its employees during Covid-19.

  • The deadline for filing for the ERTC tax credit is April 15, 2024, for eligible wages earned in 2020 and April 15, 2025, for eligible wages earned in 2021. An ERTC company can help you file for the tax credit.

  • Yes. Thanks to the Consolidated Appropriations Act of 2020, businesses can receive ERTC tax credits even if they also applied for a PPP loan.(14)

  • The ERTC is not a loan and does not need to be repaid. Instead, it’s a refundable tax credit designed to help businesses overcome financial hardships caused by Covid-19.

  1. https://home.treasury.gov/system/files/136/ERC-COVID-Snapshot-5.7.21_full-text.pdf
  2. https://www.irs.gov/coronavirus/employee-retention-credit
  3. https://www.uschamber.com/co/run/finance/how-to-get-employee-retention-tax-credit
  4. https://www.congress.gov/bill/116th-congress/senate-bill/3548/text
  5. https://www.irs.gov/newsroom/employee-retention-credit-2020-vs-2021-comparison-chart
  6. https://www.irs.gov/pub/irs-pdf/f941x.pdf
  7. https://www.irs.gov/forms-pubs/about-form-7200
  8. https://www.irs.gov/refunds/about-wheres-my-refund
  9. https://www.whitehouse.gov/american-rescue-plan/
  10. https://www.congress.gov/bill/116th-congress/senate-bill/3548/text
  11. https://www.irs.gov/pub/irs-pdf/f941x.pdf
  12. https://www.govinfo.gov/app/details/PLAW-116publ93

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