Over the past 2 years, the COVID-19 pandemic has put a lot of small businesses through financial hardship. The government restrictions meant that businesses had to modify their opening hours and close certain elements of their business in order to keep making as much profit as possible.
Even now, after the restrictions have been lifted, business owners are struggling to make ends meet because of the money that they’ve paid out in wages, meaning they haven’t made their normal profits.
However, there is light at the end of the tunnel. The IRS launched a scheme to cover 2020 and 2021, named the Employee Retention Credit Scheme. This CARES Act provision is designed to give business owners a little money back for the funds lost on paying wages if the employee wasn’t working their full hours.
Myrtha Chang was originally concerned that she’d have to lay off some of her employees from her tutoring business Mathnasium, Newton, MA.
“During the pandemic we lost two-thirds of our enrolment, meaning I had excellent tutors sitting there with no work to do. I didn’t want to let them go because it’s difficult to find good tutors, but I was faced with a situation where I may have had no choice in order to keep my business running.”
The ERC meant that Ms. Chang was able to claim back 6 figures in recouped costs for the wages she’d paid out when her staff weren’t working.
The provision means that business owners could claim up to $5,000 per employee for the first year and up to $7,000 per quarter per employee for the second, depending on the wage that the employee would normally receive. This is designed to pay out 50% of each employee’s wages to give the business a boost.
Jay Feilen, the Chief Revenue Officer at ERC Benefits says, “Lots of CPA firms are denying businesses this opportunity, simply because they don’t understand the credit in detail or feel that the criteria to receive the payment will be too high. But actually, as long as you have the supporting evidence, it’s incredibly easy to get some of your money back.”
To be eligible for Employee Retention Credit, each business must show that they have suffered a sizable financial detriment due to the restrictions or pandemic. This means showing bank statements, invoices and receipts which only equate to up to 80% of their normal annual turnover. If a business has lost more than 20% of its expected profits, it will immediately qualify.
For businesses that began midway through the pandemic, they can also claim too, by showing forecasting and predictions based on intended earnings.
Ms. Chang was shocked to find out how much she qualified for. “It was amazing to me that just a few quick documents could give me all of those lost earnings back. I didn’t believe it until the check cleared in my account. It’s saved my business and means that I can keep all of my tutors for when the work starts to pick back up.”
ERC Benefits helps businesses to claim their money back, even if the small business is subject to a Paycheck Protection Program (PPP). As the restrictions have now been lifted and businesses can start to function as normal, the scheme is due to close in early 2023. But there’s still time to claim retroactively, right up until 2024.
If your business has struggled due to COVID-19 and you’d like to see if you’re eligible for any money back, contact ERC Benefits today on 561-680-467 or visit ercbenefits.com.