Things have been extremely challenging for many businesses in the last few years, to say the least. The corporate landscape has shifted drastically, and in some cases, these changes are here to stay when it comes to the way of doing business.
One of the biggest changes to navigate was the introduction of the Employee Retention Credit. For eligible employers that have suffered revenue losses during the pandemic or have had business partially shut down due to a government order, the Employee Retention Credit could be the thing you need to help your business find its footing on shifting sands.
If you’re not taking advantage of this powerful tax credit, your business could be missing out on thousands, hundreds of thousands, or even millions of dollars. We’ve seen the Employee Retention Credit save businesses on the brink of shutting down.
It’s time to learn about the details of the Employee Retention Credit landscape so you don’t miss out on one of the most important tax credits in recent history.
Look Again at Your COVID-19 Employee Retention Credit- You Won’t Regret it!
When we bring up the topic of the Employee Retention Credit (ERC) to potential clients, many of them say that they got it during the pandemic. However, when we get deeper into the conversation it becomes clear that they actually only applied for the Paycheck Protection Program (PPP), which is not the same as the Employee Retention Credit.
Other clients we speak to who did hear about the Employee Retention Credit, but think that they’re not an eligible employer because they are unaware how many updates, addendums, and changes have been made to it.
The COVID-19 Employee Retention Credit has gone through various shifts and changes. Trust us when we say that this topic is absolutely worth your time and effort, and we implore you to look again– even if you think you’ve got all of your bases covered.
COVID-19 Employee Retention Tax Credits Defined
Simply put, the Employee Retention Credit is a temporary program in the United States began in response to the economic impact caused by the COVID-19 pandemic. It originally was part of the Coronavirus Aid Relief Economic Stimulus Security Act (also known as CARES).
Even though the disaster tax relief act was temporary, it’s still in effect due to the prolonged impact that the COVID-19 pandemic is still having on the economy today.
When an economic downturn occurs, some companies are forced to lay off workers. This can lead to a vicious downward economic spiral that can critically damage the economy. The Employee Retention Tax Credit is a broad-based refundable tax credit that is currently in place to encourage companies to keep employees on their payroll and avoid that spiral.
At the moment, the credit is 50% (capping at $10,000) of qualified wages paid by an eligible employer whose business was suspended (in full or in part) due to COVID-19, or whose gross receipts decline by more than 50%.
A Brief History of the COVID-19 Employee Retention Credit
As the Employee Retention Credit is fairly new, here is a timeline of when it was introduced, and some details about how it has evolved – even in such a short time.
March 2020
Employee Retention Credit is introduced to encourage companies to keep their workers on payroll during the coronavirus (COVID-19) pandemic. At the time of its introduction, employers were eligible to take advantage of the credit until the end of 2020 unless any new legislation would end it earlier.
Note that when the ERC was introduced, it was not available for anyone who was already receiving funds from the Paycheck Protection Program (PPP). It also couldn’t be calculated using any wages paid for medical leave or family leave, or any wages already used for the Work Opportunity Tax Credit (WOTC) in the same calendar quarter.
December 2020
A new act known as the Consolidated Appropriations Act (CAA) came into play and had a few major effects on the Employee Retention Credit. Making things even more complicated, some of the changes were retroactive, though most took effect on January 1, 2021.
The most drastic changes were that now the credit would be extended through June 30, 2021, and the way that gross receipts were calculated would change.
Additionally, the threshold of what was considered a “small employer” and a “large employer” changed. “Small Employer” was now anyone with 500 employees or less, and “large employer” was now anyone with more than 500 full-time employees.
The CAA also allowed many of those who were taking advantage of any Paycheck Protection Program (PPP) loans to participate, and they could claim their Employee Retention Credits using wages they didn’t use for PPP forgiveness.
March and April 2021
The Internal Revenue Service (IRS) sent out notices that gave formal answers to frequently asked questions (FAQ) that were previously only available on the IRS website. They also provided more formal written guidance regarding the Consolidated Appropriations Act (CAA) updates to the credit.
Later in March the American Rescue Plan Act of 2021 (ARPA) was introduced. This made some changes to the Employee Retention Credit that were effective as of July 1, 2021.
Some of the notable changes were an extension of the ERC through December 31, 2021, and new credit opportunities for certain recovery startup businesses that began after February 15, 2020 and that had an average of $1 million dollars or less in gross receipts.
The ARPA also identified “severely financially distressed employers” (SFDEs) as businesses that had gross receipts drop at least 90%. These companies would not be bound by the “larger employer” limitations.
August 2021
The IRS sent out another formal FAQ document that answered some questions regarding definitions of full-time and part-time employees, whether owners and spouses were eligible for wages, and if it was advised to amend returns if they wanted to use wages toward the ERC.
Later in August, the IRS also introduced a “safe harbor” that gave the opportunity for employers to exclude any PPP loans that were forgiven from their gross receipts when they were determining if they were eligible.
More Changes May Be On the Horizon
As you can see, the Employee Retention Credit and the other acts that altered it were all in an effort to react to the unfolding aftermath of the global pandemic. The long-term effects of the pandemic are far from over, and as this uncertain situation continues to evolve, we may also see an evolution of the Employee Retention Credit beyond what it currently is today.
Quentelle has been at the forefront of every change affecting the Employee Retention Credit, and we’ve helped our clients navigate the situation quickly and efficiently. With an ever-shifting economy and government regulations, if you’re not current on your information it can cost your company a substantial amount. For some of the companies we’ve helped, it would have meant millions lost.
Remember that Quentelle is here to assist as the Employee Retention Credit continues to unfold. Speaking of which, let’s talk about how it may affect other credits your company is qualified to receive.
Who Can Qualify for the COVID-19 Employee Retention Tax Credit?
A common misconception is that this is just for “big companies”, but that isn’t true. The credit is actually available to any employer regardless of size, and is also available to tax-exempt organizations as well. There are two exceptions, however. Small businesses that take Small Business Loans and state and local governments and their agencies are not considered eligible employers.
Here are some other things to consider when verifying if your company is eligible. To qualify as an eligible employer, your company needs to meet one of two alternative “tests” (which is essentially just checking to see if you meet the criteria). These tests are calculated each calendar quarter.
Each calendar quarter’s test will ask:
- Was your business fully or partially suspended by government order due to COVID-19?
- Were your gross receipts below 50% of a comparable quarter in 2019?
Note that once your company’s gross receipts rise above 80% of a comparable quarter in 2019, you will no longer qualify (at the end of that specific quarter).
COVID-19 ERC Use Cases for Your Business
Now we want to show you some practical, hands-on examples and use cases of how the COVID-19 Employee Retention Credit can be used in your business.
As you’ve learned so far, accurately tracking all of your relief and tax credit opportunities is complex and challenging. Not only do you need to figure out your eligibility, but also the order in which to use your options so you don’t miss out on the maximum credit available to you.
If your company tries to track all of these details yourself in-house, it’s almost guaranteed that you’ll miss an opportunity, miscalculate some wages paid, or even make a glaring mistake. The results aren’t optimal and can cost you big.
Here at Quentelle, we are the industry leader when it comes to accurately automating your Employee Retention Credit, as well as your other tax credit and relief opportunities.
Our platform doesn’t replace your HR team, it equips them with a powerful tool to automate repetitive, time-consuming tasks – including navigating your Employee Retention Credit. In addition, it can help your company easily get through the complex, layered maze of optimizing your Paycheck Protection Program (PPP), Work Opportunity Tax Credit (WOTC), and your Employee Retention Credit (ERC).
You can rest assured that your team will have all of the information and resources available to make the best decision for your business so that you get the maximum credit and don’t leave a single cent on the table.
Tax Credits and Financial Relief at the Speed of Information
As you’ve seen, the Employee Retention Credit (ERC) has changed multiple times, and as we’ve mentioned, it may change again. Here at Quentelle, our software team is hyper-aware of any upcoming changes and we update our software quickly so that you can stay 100% current no matter what shifts may occur.
When it comes to your bottom line, don’t rely on paper flyers or emails from the IRS to keep you informed. Instead, let your software update automatically, keeping you as current as possible at all times.
Technology Backed By the Best People in the Industry
When you work with us here at Quentelle, you’re not just getting the industry-standard platform when it comes to automating your human resources processes – you also get the support of our full team to help guide you.
Our team is made of the very best in the business and we are passionate about helping companies like yours navigate Employee Retention Credit situations and anywhere else we assist.
If you want a team of experts and the most powerful software tools available, you’ve come to the right place.
Streamline Your Workflow
When you automate your Employee Retention Credit and other relief and credit opportunities, you’re making it easy on your entire team. By removing cumbersome paper forms and multiple pieces of software, your team can work simply and efficiently.
By using our platform, your human resources team will have a single, clear place to work within, which will increase efficiency and accuracy.
In addition, with all of the mindless, repetitive tasks automated, your team can focus on the aspect of their role that is most valuable to your company. Let our platform do the work that’s best suited for computers while your team does the job that only a person can do.
The Power of Employee Retention Credit Analytics
When you use our platform, you’ll gain access to an incredible amount of data that can help you see the whole picture. Imagine a world where your team gets easy access to data-driven insights that can help you maximize opportunities to retain your workforce.
Every company has a different definition of what they would consider a large sum of money. And no matter what that sum is, you risk missing out on it unless you properly claim your Employee Retention Credit.
Use the data on Employee Retention Credit to make sound business decisions that your competitors haven’t figured out. When you use our platform, you can get a clear, easy-to-understand picture of your current tax credit situation. This will give you the power to make business decisions that would otherwise not be possible.
Don’t guess when it comes to Employee Retention Credits. The analytics within the Quentelle platform are easy to use, powerful at-a-glance, and are built from the ground up to help save you time, empowering you to make the best decisions for your business.
Using Employee Retention Credits Data to Plan Your Future
The role of machine learning (ML), natural language processing (NLP), and artificial intelligence (AI) is more important than ever. If you and your team are still relying on spreadsheets, basic reporting from CRMs, or worse – guessing – you are falling behind the curve when it comes to human resources solutions.
Quentelle’s innovative platform is designed to enable data access and people data analysis from a single source. This means that it’s easier than ever for your HR team to make sound forecasts with a minimal investment of time and effort.
Additionally, this data won’t just help you with your Employee Retention Credit situation, it will also allow you to maximize your other available tax credits, lower the cost of your unemployment insurance claims, and improve your hiring process.
By having a deeper understanding of the revenue opportunities regarding your Employee Retention Credit, you’ll be able to make financial decisions that reflect the AI-generated projections. This can be invaluable when it comes to expanding your business, moving into new markets, or increasing your overall return on investment (ROI).
Qualified Wages: How the COVID-19 Employee Retention Tax Credit is Calculated
As we mentioned, the amount of your employee retention tax credit is 50% of the qualifying wages paid up to $10,000 dollars.
This is specifically effective for wages paid after March 13th and before December 31, 2020.
So what wages are considered “qualifying wages”? Well, it depends. The U.S. government defines qualifying wages differently depending on whether an employer had an average of more than 100 employees or fewer than 100 employees in 2019.
If an employer had fewer than 100 employees on average in 2019, then they are considered a “small employer”, and the credit is based on the wages that were paid to all of their employees. This still applies whether the employees worked or not. Meaning, even if the employees did work full time and were paid for that full-time work, the employer would still get the credit.
If an employer had more than 100 employees on average in 2019, then they are considered a “large employer” and the credit is only allowed for wages that were paid to any employees who did not work during that calendar quarter.
Something else to consider is that no matter what the average employee count was, all companies (both over and under 100 employees) could claim “wages” that went beyond cash payments. These companies could also include some of the cost of healthcare that they provided to employees.
How the COVID-19 Employee Retention Credit Works Today
Firstly, in regard to the Employee Retention Credit, many business owners did not keep up with the fluid and shifting condition of the credit. As you read in the brief history, many things were amended and the qualifications shifted more than once.
With that said, many companies looked into the Employee Retention Credit once in the past, and then wrote it off if they were ineligible. It’s important to take a closer look to be sure that you don’t miss out on an incredible opportunity.
There was no guidebook for the pandemic, and many businesses were doing the best they could to stay afloat. A lot of them took advantage of other relief opportunities such as the Paycheck Protection Program (PPP) and Work Opportunity Tax Credit (WOTC), but then also took advantage of the Employee Retention Credit (ERC).
How do all of these things interact with each other? Here is a quick primer on how to navigate this situation.
What About ERC, PPP, and WOTC?
At the moment, there aren’t any specific rules that prohibit a company from using the same calendar quarter pay period for multiple credit and relief options. The only catch is making sure you separate and “earmark” what dollars are being used for which program. The basic rule of thumb is that you can’t “double dip.”
You have to tag each of your payroll dollars for any program you want to use it for. So let’s say that you wanted to use 50% of your period’s payroll on the Paycheck Protection Program (PPP). That would mean that you’re left with the other 50% that is available for other programs (if you meet the qualifying criteria).
There are quite a few companies who will qualify for Employee Retention Credit (ERC), Paycheck Protection Program (PPP), and Work Opportunity Tax Credit (WOTC), so they need to decide what the optimal split of that period’s payroll would be.
There are no two ways about it: doing this on your own can be very challenging because you’ll not only need to decide which program your dollars should go toward – but also the order it should be applied to get maximum credit.
This is a general, generic order to consider as you’re starting the process of deciding what credit and relief options are best for your business.
1) Paycheck Protection Program (PPP)
Speaking generally, consider that you’ll most often want to make your Paycheck Protection Program (PPP) loan forgiveness your top priority. After exhausting those credits, use your wages paid towards the Employee Retention Credit (ERC) since a smaller percentage of those payments are actually allowed as a tax credit.
2) Work Opportunity Tax Credit (WOTC)
Next up, consider your Work Opportunity Tax Credit (WOTC) payroll (and of course, this is if you have any use for a Federal Income Tax credit this year and if you qualify at all). Also note that the maximum percentage of wages for the WOTC credit is 40%.
3) Employer Credit for Paid Family and Medical Leave
Finally, check to see if your company qualifies for the Employer Credit for Paid Family and Medical Leave. This should be applied after WOTC wages because of the lower percentage of the credit – it ranges between 12.5% and 25%.
4) Remember, There is No Cookie-Cutter Approach
It’s important to explicitly state that there is not a single, cookie-cutter method for any company and that this is just a high-level strategy of how to get started. There are many details that each company needs to take into consideration, and careful planning and research is definitely in order.
Sample COVID-19 ERC Case Study
It’s no secret that many companies were asked to shut down their operations during the COVID-19 pandemic– and for many this resulted in reduced revenue. We want to give you some specific examples of some businesses that experienced a loss of revenue and how their COVID-19 Employee Retention Credit came into play.
Additionally, we’ll include some eye-opening statistics that pertain to the COVID-19 Employee Retention Credit.
Eye-Opening Facts and Statistics About COVID-19 ERC
- $9.3 million dollars is the largest ERC award to date
- $140,000 is the overall average ERC receives per business
- You can still submit a claim for 2020 and 2021
- Businesses that qualify as being “severely distressed” have no cap to their total funds eligibility
- As we’ve mentioned, even if you’ve gotten Payroll Protection Program (PPP) loans, you can still qualify.
Industry-Specific Statistics and Amounts for COVID-19 ERC
- $4.6 million – in COVID-19 ERC was awarded to a TV and radio company that had 400 employees
- $1.5 million – in COVID-19 ERC was awarded to a brewery and restaurant that had 100 employees
- $1.1 million – in COVID-19 ERC was awarded to a nonprofit that focuses on leadership skills with 60 employees
- $500 thousand – in COVID-19 ERC was awarded to a professional services firm that has 60 employees
As you can see, while some of these examples are larger companies, not all of them are. Don’t assume that just because you have a smaller staff you might not qualify.
A More Detailed Case-Study of COVID-19 ERC
Let’s look at an assisted living community that was mandated to stop giving tours to potential new residents and as a result suffered lost revenue. Here is a look at their eligible wages along with their ERC claim amount for the 2020 tax year. Let’s break it down by quarter.
Quarter 1
Eligible Wages: $123,764
Q1 ERC Credit: $61,631
Quarter 2
Eligible Wages: $233,771
Q2 ERC Credit: $116,885
Quarter 3:
Eligible Wages: $112,974
Q3 ERC Credit: $56,489
Quarter 4:
Eligible Wages: $49,126
Q4 ERC Credit: $24,563
Total Eligible Wages: $519,635
Total ERC Credits: $259,567
As you can see, this assisted living facility was eligible for a staggering amount of tax credit compared to their eligible wages. This is just one case study of the importance of having an organization like Quentelle determine what eligibility you might have so you don’t miss out. And remember, don’t rely on a typical CPA– you could be costing your company a fortune if an expert doesn’t take a close look at your company.
How Employee Retention Tax Credits Help Your Business
As a business owner, the most obvious benefit of the Employee Retention Tax Credit is that it can help your business survive in challenging times. And while that’s absolutely true, let’s take a look outward.
Not only are you protecting your company, but the credit encourages you to keep employees on your payroll. Knowing that their job is secure can give a palpable measure of peace when times are uncertain.
By taking advantage of this credit, you’re avoiding layoffs and helping your company – it’s a win-win for you and your employees. We’ve also seen employee morale skyrocket when they hear from their employer that come what may, their job is secure.
A welcome side-effect of the Employee Retention Credit is that you can announce that your company is keeping its employees while others are resorting to layoffs. While this isn’t the primary reason for taking advantage of the credit, it’s certainly a welcome piece of positive public relations.
Does Claiming ERC Credits Cause Audits?
No, it will not. Now, that’s not to say that you are guaranteed not to be audited, it just means that your company accepting any relief or tax credits doesn’t have any sort of effect on whether you’re selected by the Internal Revenue Service (IRS) for an audit.
There are some rumblings that there are more audits than usual, but there’s more to this. It’s simple: if fewer businesses file for the tax credits due to them, there is a smaller pool for audits. When you take advantage of these tax credits, you’re increasing the pool of overall filers. So the more people who use the ERC, the less likely they are to be audited.
Remember that having an opportunity to get thousands of dollars worth of tax credits definitely outweighs the slight risk of being audited. The other thing to keep in mind is this: as long as you keep clear, accurate records of everything and have supporting documentation, you don’t have anything to be worried about.
The Bottom Line on the Employee Retention Credit
The simple fact of the matter is that many businesses are leaving thousands, hundreds of thousands, even millions of dollars behind as you read this because they’re not taking advantage of the Employee Retention Credit.
This may be for any number of reasons. Perhaps these businesses are misinformed, confused, or under-educated on the matter. For some, they simply don’t even know that this tax credit is even an option.
If you haven’t looked into this opportunity recently, we urge you to take a closer look today. Don’t be one of the businesses in the United States leaving large sums of money on the table. Even better – don’t be one of the businesses that is needlessly resorting to layoffs when there’s another path right in front of them.
And don’t go it alone. Truly, this is an opportunity worth a quick phone call to our team here at Quentelle. A quick conversation could be worth several thousand dollars or more.
Quentelle is Your Best Choice for Maximizing Retention Credit
As you’ve learned, the world of disaster tax relief and credits – especially the Employee Retention Credit – is a complex and nuanced one that has shifted frequently and has the potential to change yet again.
When it comes to navigating that complex and nuanced world, Quentelle is the industry leader. We specialize in helping businesses like yours get back on track by recovering the maximum credit when it comes to COVID-19 ERC benefits.
Here are just a few of the ways that we’ve helped companies thrive in uncertain times:
- We worked with an automobile dealership to save $2,000,000+
- We saved a Fortune 500 manufacturer $1,000,000+
- We help a janitorial services company save $800,000+
That’s just for starters. We’re experts when it comes to tracking qualified wages, making certain you get the most when it comes to year-over-year gross receipt deductions, and ensuring your ability to claim PPP Loans and ERC. We’ll make sure that you get the absolute most credit when it comes to each qualified employee. This is more important than ever now that credits have increased from $5,000 per qualified employee to $28,000 per qualified employee.
Start Saving Today and Prepare for Your Future
At Quentelle, our solutions are smart and simple, redefined. We help companies like yours with what we call the “power of one.” That means one contract, one platform, and one data source so that you can easily take advantage of the tools that we offer.
Our award-winning technology is delivered to you through a simple user experience that anyone in your company can get used to quickly, and will save you time and money.
Employee retention credits are just the beginning. We also offer best-in-class options for verification of employment, point-of-hire tax credits, unemployment claims, unemployment tax planning and much, much more.
Quentelle is far more than just advanced technology. Our best-in-class HR solutions are backed by a caring team of experienced people who will be here whenever you need us.
If you’re ready to see how you can start saving now when it comes to employee retention credits, let’s talk today.
Give us a call at 888-565-5515, or you can schedule a demo so we can show you the power of our software firsthand. We look forward to connecting with you soon.