What are the Qualifications for Claiming ERTC? 

 December 12, 2023

By  Jace W Campbell, CPA

Qualifications for Claiming ERTC

The Employee Retention Tax Credit (ERTC) is a vital component of the CARES Act that was passed in 2020… Designed to incentivize businesses to keep employees on their payroll during periods of economic uncertainty, this initiative is an important part of keeping our economy afloat… A complete analysis could fill volumes, but we’ll aim to give you a robust understanding without getting too far into the weeds…

How Confident Are You In Your ERTC Eligibility?

Watch Our Video Explaining the Fraud We’ve Seen From National ERC Promoters

Qualifying for the ERTC

Now, you might be asking yourself about employee retention credit qualifications… As per IRS guidelines, there are certain conditions that businesses must meet in order to qualify for these credits. First and foremost, your business must have

been operational when COVID-19 lockdowns were implemented… Additionally, either your business’s gross receipts need to show a significant decrease compared with the same quarter from the previous year or your operations need to have been fully or partially suspended due to governmental orders related to COVID-19…

But what constitutes a ‘significant’ decrease? Well, according to IRS.gov, it’s considered significant if there was at least a 50% drop in gross receipts for 2020 and a 20% drop for 2021…

Navigating Complex Eligibility Rules

It’s worth noting that the eligibility rules are complex and can change as new legislation is passed… There are also exceptions for certain types of businesses and specific employee situations. For instance, Treasury.gov states that more generous rules apply for organizations with less than 500 employees…

This is where professional help can come in handy. Navigating these complexities alone can be daunting… But expert advice can guide you through this labyrinthine process.

The Role of Qualified Wages

In order to understand the employee retention credit qualifications, it’s essential to dig into the role of qualified wages… By definition, these are wages that employers pay to employees during times when their business operations are disrupted due to COVID-19 restrictions. However, the determination of ‘qualified’ can be contingent on factors like the size of your organization and other specific circumstances…

One important aspect is the credit limit against applicable employment taxes for each calendar quarter. According to recent legislation, this amount is capped at 70 percent of the qualified wages paid to each employee in a given calendar quarter…

This update comes from Section 3134(n) of the Code, which was amended by section 80604 of the Infrastructure Investment and Jobs Act in 2021… The amendment limits the employee retention credit under section 3134 of the Code to wages paid after June 30, 2021, and before October 1, 2021. However, for eligible employers operating as recovery startup businesses, this period extends until January 1, 2022…

Now you might wonder what defines an “eligible employer”… Well, according to Section 2301(c)(2)(A)(ii)(I) of the CARES Act – an “eligible employer” is any employer who was conducting a trade or business during a calendar quarter for which credits are being determined under section 2301(a) of the same Act. In addition to this criteria, if your business operation was fully or partially suspended during any given calendar quarter due to government-imposed COVID-19 restrictions, then you also qualify as an “eligible employer”…

However complex these rules might seem initially – it’s worth noting that they’re designed with flexibility in mind… The goal here is not only about supporting businesses through challenging times but also providing them with resources needed for recovery.

But navigating these rules can be tricky and mistakes can lead to penalties… Hence, it’s advisable to consult with professionals like tax advisors or CPAs who can guide you through the process. Their expert advice could help you maximize your credits while staying compliant with the IRS regulations.

Beware of ERTC Misinformation

The world of employee retention credit qualifications is, unfortunately, not devoid of misinformation… Some firms might employ deceptive tactics to encourage you to enlist their services. These strategies could range from overstating potential benefits to underplaying the risks associated with claiming these credits…

Also read: Can Nonprofits Claim the ERTC?

The Art of Overstating Returns

One common tactic is the promise of inflated returns… Some firms make grandiose claims about the benefits you’ll receive from their services. They might boast about astronomical numbers without providing substantial evidence or any reference to your unique business situation… While it’s true that the Employee Retention Tax Credit can bring significant relief for businesses affected by COVID-19, these benefits are heavily dependent on specific qualifications and circumstances…

Keep in mind that as a business owner, you’re ultimately responsible for these tax credit claims… Despite how confident or knowledgeable an ERTC “expert” may seem, this responsibility cannot be shifted onto them. It’s therefore critical that you understand the implications and complexities involved in this process.

Underplaying Risks and Consequences

Equally concerning are firms that downplay the risks associated with applying for these credits… The truth is, claiming these credits involves making accurate declarations to governmental bodies such as the IRS — areas where mistakes can have serious consequences. Penalties could range from fines to criminal charges in severe cases…

This isn’t meant to scare you off but rather emphasize the importance of seeking accurate advice and guidance when navigating employee retention credit qualifications. It’s also why working with reputable professionals who can provide correct information is paramount.

ERTC Knowledge: A Spectrum

As you’re reading this, we acknowledge that our readers come from different backgrounds and levels of understanding regarding ERTC. Whether you’ve done some independent research or perhaps even a CPA looking for ways to serve your clients better, it’s essential to have a robust understanding of ERTC…

To sum up, we’ll be exploring:

1. An overview of the Employee Retention Tax Credit.

2. The qualifications for the ERTC.

3. The misconceptions and deceptions that firms use to entice sign-ups.

With this information in hand, you’ll be well-equipped to navigate employee retention credit qualifications and avoid falling prey to misinformation… After all, knowledge is power — especially when it comes to navigating complex financial landscapes.

The Promise of Overinflated Returns

One common tactic is promising significantly inflated returns… While it’s true that some businesses have received substantial credits, each case is unique. Predicting exact amounts without thorough analysis of your individual circumstances can be misleading…

Downplaying Compliance Risks

Another red flag is firms that downplay compliance risks… Claiming these credits involves making accurate declarations to the IRS — an area where errors can have serious consequences. It’s crucial to work with a professional who acknowledges this risk and takes steps to mitigate it.

Also read: Refundable vs Nonrefundable: What is the difference for ERTC?

The JWC ERTC Advisory Difference

At this point, you might be wondering about your next steps in pursuing employee retention credit qualifications… This is where JWC ERTC Advisory CPA comes in.

Unlike many other ERC firms, we pride ourselves on our transparent approach… We acknowledge both the potential benefits and risks involved in pursuing these credits. Our goal isn’t just to help you secure credits — it’s also to ensure that you’re compliant with all relevant regulations…

Working with us means receiving an independent eligibility review. This is especially important for those who’ve previously filed for ERTC but have questions or doubts about their eligibility… Our team has extensive experience in navigating this complex landscape and can provide you with clear, accurate advice.

The IRS Crackdown on ERTC Fraud

Recent crackdowns by the IRS on ERC promoters highlight the risks associated with non-compliance… The IRS is actively working to curb ERTC fraud, and businesses found in violation of regulations could face severe penalties. This underscores the importance of working with a trusted advisor like JWC ERTC Advisory CPA…

Protecting Yourself from Penalties

Avoiding penalties isn’t just about staying within the law — it’s also about understanding it… The IRS provides detailed guidance on employee retention credit qualifications, but this information can be complex and difficult to interpret…

That’s where we come in. We’re committed to helping our clients understand their obligations under the law… By working with us, you’ll not only protect yourself from potential penalties — you’ll also ensure that you’re making the most of your eligibility for credits.

The Fear, Uncertainty, and Gain

Pursuing employee retention credit qualifications can be a process fraught with fear and uncertainty… But there’s also potential gain. With the right advice and careful compliance, these credits can provide substantial relief for businesses navigating challenging times…

By partnering with JWC ERTC Advisory CPA, you’ll have peace of mind knowing that your claims are in capable hands. We bring not only our technical expertise but also our commitment to transparency, ethical practice, and client success…

Remember: You are ultimately responsible for these tax credit claims… Don’t let anyone convince you otherwise. By being informed and vigilant — and seeking professional advice when needed — you’ll be well-positioned to navigate this process successfully.

Jace W Campbell, CPA

Jace founded JWC ERTC Advisory CPA in March 2021 as the nation's first and only public accounting firm focused solely on ERC . . . and nothing else. He has personally signed over 9,000 ERTC claims and is proud to be executing these claims conservatively, and how intended by Congress.

He has a passion for educating clients so they can make the best decision for themselves.  If you read articles and watch videos that Jace produced in 2021, his approach is the same now as it was then.

While other firms pivot their messaging to comply with new IRS guidance, Jace continues preaching the same conservative principles that have helped clients recover hundreds of millions . . . while sleeping easy at night.

related posts:

Can You Claim Employee Retention Credit in 2023?

Can You Claim the Employee Retention Credit in 2022?

Employee Retention Credit Scams: What You Need to Know

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