There are two ways most businesses can qualify for the ERC:

First, your business may have experienced a decline in gross receipts over a declared quarter. If you're claiming the credit for 2020, a decline of 50% or more must be shown; however the credit is capped at $5,000 for the year per employee. If you're claiming the credit for 2021, the government expanded the credit for businesses who only experienced a 20% reduction in revenue. For the first three quarters in 2021 businesses can be eligible for up to $7,000 in credits per employee. Therefore the total eligible credit per employee if you qualify for each quarter is $26,000.

Second, your business may have experienced either a “Complete or Partial” Closure. During Covid, local government restrictions and mandates were put into place across the US; social distancing, being compelled to work from home, or even the closure of your business in its entirety. If your business was subject to any of these orders you can qualify. Not sure if your business was impacted? We can check for you during your application using our database of government orders.

Forgiven Paycheck Protection Program (PPP) loans and certain other COVID-19 relief grants may be excluded from the gross receipts calculation if excluded from all quarters consistently. For guidance on this safe harbor, see more from the IRS here.

If your business has more than one legal entity or is part of a controlled group or an affiliated services group, all entities must be aggregated under the rules in IRC Sections 52 and 414. IRS aggregation rules apply to your gross receipts calculation, so you must take into account the gross receipts of all entities in your group. See more from the IRS here.

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We've done as much work as possible to automate and simplify your application while also ensuring we can maximize your credit. If you have all the required business information at hand, the application can take as little as 20 minutes. To help the process go quickly, check out our ERC Digital User Guide. It lists all the information you'll need to have ready.

The IRS is hard at work processing these refund requests and they're short staffed. You may have seen it in the news. The wait time is currently between 9-12 months from submitting your claim to getting your money. However, at ERC Digital we are the only ERC filing company with a direct link to the IRS to provide the status of your refund. We pull this information daily and alert you via email when your application is received by the IRS, accepted, processed and mailed to you. Pretty cool, huh?

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The definition of Qualified Wages varies depending on the years you're claiming the credit for:

For 2020:

For eligible employers that had an average number of full-time employees in 2019 of 100 or fewer, all wages paid to and qualified health plan expenses incurred for employees during the eligible period(s) may count toward the ERC.

For eligible employers that had an average number of full-time employees in 2019 of greater than 100, wages paid and allocable qualified health plan expenses incurred for time not providing services due to a full or partial suspension by governmental order or the business experiencing a >50% decline in gross receipts for a calendar quarter when compared to the same quarter in 2019 may count toward the ERC.

For 2021:

For eligible employers that had an average number of full-time employees in 2019 of 500 or fewer, all wages paid to and qualified health plan expenses incurred for employees during the eligible period(s) may count toward the ERC.

For eligible employers that had an average number of full-time employees in 2019 of greater than 500, wages paid and allocable qualified health plan expenses incurred for time not providing services due to a full or partial suspension by governmental order or the business experiencing a >20% decline in gross receipts for a calendar quarter when compared to the same quarter in 2019 may count toward the ERC.

If you'd like more guidance on the types of health plan expenses that may qualify, see more from the IRS here.

This is a very common situation but can seem complicated. If your business has more than one legal entity or is part of a controlled group or an affiliated services group, all entities must be aggregated under the rules in IRC Sections 52 and 414. These aggregation rules apply when determining the number of full-time employees, whether there was a full or partial suspension of operations and if the employer experienced a significant decline in gross receipts. Here's a quick test:

If your response to any of the questions below is “Yes,” then IRS aggregation rules apply to your situation.

1. Does another business own >50% by vote or value of your business?

2. Does your business own >50% by vote or value of one or more businesses?

3. Does the same individual or group of five or fewer individuals, estates or trusts own at least 80% of your business AND one or more other entities, and does the individual’s or group’s common ownership of one or more of those entities exceed 50%?

4. Do you treat yourself as part of an affiliated service group for purposes of employee benefit plans?

Determining whether the business experienced a full or partial suspension due to a governmental order should be evaluated separately for each trade or business.

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You may be able to claim the ERC if you’ve already applied for PPP loan forgiveness and you’ve already received other tax credits, so long as you don’t claim the ERC on the same wages. The IRS prohibits “double-dipping” on these programs, which means that any wages used to qualify for one program typically can’t be used to qualify for another. Such programs include but aren’t limited to the PPP, Sections 7001 and 7003 of the Families First Coronavirus Response Act (FFCRA paid leave credits), the Section 45S credit for employer-provided paid family and medical leave, and the Work Opportunity Tax Credit (WOTC). See more from the IRS here.

If your average number of full-time employees in 2019 was above the small employer threshold (>100 full-time employees in 2020 and >500 full-time employees in 2021), your qualified wages are based on wages paid to employees for time they didn’t provide services due to a full or partial suspension or significant decline in gross receipts.  

Example: your business paid employees for a 40-hour week during the impacted period but employees were only able to work for 30 hours due to a governmental order. In this case, 25% of the wages paid was for time your employees didn’t provide services.

The following are generally considered examples of “time not providing services” in relation to qualified wages:

• Essential employees who temporarily could not work on-site due to the COVID-19 outbreak
• Employees who volunteered at non-company sites (e.g., hospitals) but were kept on payroll
• Employees who reported for work but were sent home​
• Employees who were “on call” to report for work​
• Employees who used paid time off (PTO) that was granted after the beginning of the pandemic  
• Employees who were unable to fulfill all of their responsibilities due to teleworking constraints ​
• Employees who were paid for full-time work but worked less than full time (e.g., idle time)

The following are generally NOT considered examples of “time not providing services”:  

• Employees performing administrative or other tasks not part of their regular role  
• Employees not working due to a company-wide mandate not tied to a governmental order  
• Employees that used PTO that was accrued prior to the pandemic  
• Employees showing up to work but have less work to do than normal (e.g., waiting for customers to arrive)

If a business has more than one legal entity or is part of a controlled group or an affiliated services group, all entities must be aggregated under the rules in IRC Sections 52 and 414. These aggregation rules apply when determining the number of full-time employees, whether there was a full or partial suspension of operations and if the employer experienced a significant decline in gross receipts.  

If your response to any of the questions below is “Yes,” then IRS aggregation rules apply to your situation.

• Does another business own >50% by vote or value of your business?
• Does your business own >50% by vote or value of one or more businesses?
• Does the same individual or group of five or fewer individuals, estates or trusts own at least 80% of your business AND one or more other entities, and does the  individual’s or group’s common ownership of one or more of those entities exceed 50%?
• Do you treat yourself as part of an affiliated service group for purposes of employee benefit plans?

Determining whether the business experienced a full or partial suspension due to a governmental order should be evaluated separately for each trade or business.