Does Your Colorado Business Qualify for ERC/ERTC for 2020/2021? The business world suffered loss of revenue, closure, and unemployment during the pandemic.  Congress responded to this impending doom by way of establishing the ERC (Employee Retention Credit) also known as the  ERTC (Employee Retention Tax Credit). Several conditions in this program have changed since then including the ERC/ERTC Qualifications 2020/2021 for Colorado businesses. Now, a lot of entrepreneurs like you may be asking “What are the ERC qualifications for 2020/2021 for my Colorado business?” or “Is my business eligible for the employee retention credit at all?”

What is the ERC Tax Credit?

As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the ERC was created to assist and encourage employers to keep their employees through the pandemic.

In the CARES Act, Congress also created the Payroll Protection Program (PPP), but business owners were originally not allowed to apply for both the PPP and ERC.  PPP gained more attention since it was more widely advertised. Business owners quickly realized the PPP was less restrictive, easier to apply for and, more importantly, tax-free.  With ERC’s seemingly higher eligibility standards, employers were discouraged even before trying it out.

The Consolidated Appropriations Act (CAA) signed into law December 27, 2020, changed the ERC law in several ways.  First, it allowed for a business to apply for the ERC AND the PPP in the same year.  It also expanded the credits for 2021 payroll.  Please read on.

Is My Business Eligible for the Employee Retention Credit?

ERC is a great program no matter how much you can gain from it. In fact, a small business can enjoy these tax credits just as much larger businesses can. There are several ways to qualify for the ERC.  Let’s examine some of them:

• Your business experienced a decline in gross receipts when compared to the same quarter in 2019.  For 2020, a 50% decline in gross receipts was required.  For 2021, only a 20% decline in gross receipts was required to be qualified for the tax credit.
• Your business was ordered a partial suspension or a full shutdown by government order. This can include your business being limited in use or capacity of their facilities or significant changes to the business operations.  For example, restaurants that were prohibited from accepting dine-in services but could still serve take-outs or conduct outdoor services are covered by partial suspension order. Also, clinics that were open but not allowed to perform major medical operations like surgeries are qualified under this condition.
• A business that began operations after February 15, 2020, may also qualify with some limitations.

Is ERC for Small Local Business Only?

In 2020, a business is considered small if less than 100 employees for ERC purposes.  For 2021, the IRS has bumped the definition of a small business up to 500 employees. This means that almost all businesses are qualified to partake.

Are Non-Profit Organizations Qualified for the ERC, too?

Non-profit organizations were among those that took a serious hit during the pandemic. People were on tight budgets, so the insufficient flow of donations didn’t cut it. In addition, many fund-raising events had to be cancelled or restricted.  In certain cases, non-profit organizations can qualify for ERC.

What Wages Qualify?

Wages paid to owners or their relations are not eligible.  All other wages and the employer paid medical benefits are eligible and were not covered by another government program like PPP.  For 2020, it is the first $10,000 for wages paid after March 13, 2020.  For 2021, It is the first $10,000 per quarter.

How much are the ERC credits?

The tax credit is worth 50% of qualified wages up to $10,000 per employee (or $5000 maximum) for wages paid between March 13, 2020, to December 31, 2020.

For 2021, the rules were changed to 70% of qualified wages up to $10,000 per employee per quarter (or $7000 maximum) for wages paid between January 1 to September 30, 2021.  Therefore, if all wages are eligible for all of 2020 and 2021, you may qualify for up to $26,000 per employee!

For new businesses, only wages paid in the third and fourth quarter of 2021 will qualify AND are limited to $50,000 total per quarter.

Learn About the ERC Qualifications in 2023 for 2020/2021 for Colorado Business and Take Advantage Before It’s Too Late!

If you are among those that suffered huge loss during COVID-19, it is high time you learn about the ERTC qualifications for your Colorado business. The ERC rebates for small businesses will help you recover some of the lost revenue, especially now that the changes make qualifying easier.  The only way to obtain these credits is to amend your payroll tax returns and the time to amend is running out!

If you have questions like: “Does my business qualify for employee retention tax credit?” or “How much tax credit can I get?” An accountant can answer that. A Fort Collins CPA, like Steven J. Wick & Associates, P.C., will help you understand the ERC qualifications for your 2020/2021 payroll for your Colorado business. Whether your business was established before or during the pandemic, we can figure things out so you can make the most of this program.

Steven J. Wick & Associates P.C. has been helping Colorado businesses for many years through our services – tax preparation, payroll, bookkeeping, accounting, and consultancy services, among others. You won’t regret having us by your side as you grow your business because our CPAs are dedicated to handling accounting matters with utmost care and expertise. If you want to know more about how we can help you with ERC or other accounting matters, give us a call today!