During the course of the pandemic, many businesses, large and small, have struggled with government restrictions. This has meant that businesses have had to cut opening hours and reduce staff costs in order to stay afloat.
Some businesses have even opted to pay their staff for the time that they haven’t worked to help them out financially. However, as the COVID crisis continued, this left the businesses struggling to make ends meet.
The IRS came to the rescue though. The Retention Credit Scheme was built to offer employers a little money back to cover their losses, spanning over the past 2 years.
Myrtha Chang, a business owner from Newton, MA, had a small, yet profitable business in the tutoring field. However, the pandemic saw two-thirds of her enrolment drop out in quick succession, meaning they had too many tutors and not enough students.
Ms. Chang stated, “It was a struggle. I didn’t want to let any of my tutors go. It’s difficult to find someone who’s really good at the job and it would put me behind again when the work started to pick back up. So, I paid everyone, but that left me a little short as we weren’t receiving the payments from customers.”
Due to the CARES Act provision, named the Employee Retention Credit (ERC), Ms. Chang was able to recoup up to 50% of the wages that she’d paid out over 2020 and 2021.
The Chief Revenue Officer, Jay Feilen, at ERC Benefits was quick to tell businesses that they could claim back the money. “Lots of CPA firms are choosing not to process ERC payments, mainly because it’s a new credit that people don’t really understand. Most will say that you have to jump through a ton of hoops to get the payment and that only a select few businesses will qualify, but that’s not the case at all. In fact, the criteria are quite low.”
To qualify for the credit scheme, you simply have to show that you have been affected by the pandemic and the restrictions. This means that you need to show that you’ve made 20% less profit over the past 2 years than you would have normally. For established businesses, this should be no problem, with receipts, invoicing and tax bills as evidence. For 4 of those that were established in 2020 and have no prior model to display, a simple forecast could suffice.
Ms. Chang was shocked to see just how much she’d been able to claim back through the scheme.
“I just couldn’t believe it. I’d gone from being terrified that my business would need to close, to being completely safe and back on track with a single application. I received a six-figure check to cover the wages I’d lost. I had to pinch myself and wouldn’t even believe it was true until I saw the check clear in my bank account.”
Even if you’re set up with the Paycheck Protection Program (PPP), you could claim up to $5,000 for each employee for year one, which then rose to $7,000 per employee per quarter in year two due to the length of time the pandemic had run. For certain sectors, and depending on the wage levels, up to $10,000 could be claimed per employee.
This is a fantastic opportunity to get struggling businesses back on their feet. However, as the pandemic is now at an end and the restrictions have been lifted, the scheme is due to close in 2023. If you’re a small business, you may still be able to claim retroactively right up until 2024.
If you have a business that’s struggled during the COVID-19 pandemic, then contact ERC Benefits today for some support and assistance to claim some of your hard-earned money back. Contact them on 561-680-467 or visit ercbenefit.com to discuss your eligibility.