What you don’t know about Employee retention Credit could hurt you

Guest Blog | Adesso Capital
Oregon Restaurant and Lodging Association
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We hear it all the time: Businesses aren’t filing for the Employee Retention Credit (ERC) because of the misconceptions surrounding the program. In fact, less than 20% of eligible businesses have claimed their ERC. Which is why ORLA partnered with Adesso Capital’s team of tax experts to address some common myths about the ERC:

Myth 1: I can’t claim the ERC because I’ve already received PPP funds.

The most frequent falsehood we hear is that retailers, restaurants, and other hospitality businesses can’t receive funds from both the Paycheck Protection Program and the ERC.

This was true at one time. But a change to the CARES Act in December 2020 removed the restriction against applying for both. This vital change went largely under the radar. 

Myth 2: My business has grown during the pandemic. Isn’t the ERC only for businesses that are hurting?

Economic injury isn’t the only condition to receive ERC credits. If your business was affected by operating restrictions or supply chain issues, you’re eligible.

Myth 3: My business was deemed an essential business, so I don’t qualify.

Even essential businesses were subject to reduced operating hours, or reduced capacity. Just about every “essential” business (and that definition varies from state to state) was forced to operate under pandemic restrictions at some point, making even essential businesses eligible for the ERC.

Myth 4: I’m not eligible because employees I had in 2020-21 have since quit, were fired, or were replaced.

The Employee Retention Credit is based on the number of employees on the payroll, not specific employees. Turnover in the restaurant business is common but it doesn’t prevent you from claiming what could be tens of thousands of dollars in taxes you’ve already paid. 

Myth 5: My business wasn’t shut down during the pandemic. 

For much of the relevant ERC time period, businesses weren’t forced to be closed. The ERC covers 2020 but also three quarters of 2021 – a timeframe when most businesses were back to business as usual. 

Myth 6: My business’ sales rebounded in the first quarter of 2021, so I’m not eligible. 

Thanks to a change to the CARES Act, you have the option to look at one quarter prior. This means Adesso can determine eligibility based on lost revenue in 2020. Also, if your business was subject to a full or partial suspension, you may qualify regardless.

The truth is, filing for the ERC is complicated. We would hate to find out you missed out on receiving up to $26,000 per employee because you got some bad advice. Or because you believed the myths out there about the ERC program. 

We know there are tons of things your business could do with the money. Let Adesso take care of the entire refund filing process, from the initial phone call to follow-ups. All you need to do to get started is to schedule a call to see how much you qualify for.