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Qualifying for the Employee Retention Tax Credit Due to Hardships from Local Regulations

By March 8, 2023Payroll

Employee Retention Tax CreditBusiness owners are wondering if they can still claim the Employee Retention Tax Credit (ERTC) under the CARES Act if they suffered a loss in revenues due to COVID-19. In particular, MarathonHR has received a number of questions about possible new ways to qualify.

As a reminder, the ERTC was created to help businesses keep employees on their payroll during the COVID-19 pandemic and provide some financial relief. The ERTC is a refundable tax credit based on employee wages paid between March 13, 2020, and September 30, 2021. To claim the credit, employers can retain part of the employment taxes that they would have normally been required to submit.

Can Employers Still Qualify for the ERTC?
Even though the ERTC has expired, employers who experienced a significant loss of revenue during the period that the credit was effective may still be eligible to claim it.

The question is how to know if your business could still legitimately qualify. Some businesses claim that, in addition to a loss of revenue, they suffered hardships from local government mandates and restrictions that affected their operations. Restaurants that normally receive many patrons, for example, had qualifying burdens that office-based businesses didn’t experience if they don’t have a regular stream of visitors.

What to Do Next to Claim the ERTC
If you experienced a reduction in revenue, the ERTC credit application should be straightforward to submit. However, it can be hard for businesses to determine if they qualify because government rules can be confusing. If you are considering making claims under non-revenue categories like supply chain issues or having operations suspended due to government orders, we recommend consulting with a qualified and trusted advisor, as these issues can be more difficult to demonstrate.

Working with a firm that can make the claims on your behalf may be a good strategy, even though they will charge fees.

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