Are you a federal, state, or local entity?

The federal government, the governments of any state or political subdivision thereof, and any agency or instrumentality of those governments are not Eligible Employers and are not entitled to receive the Employee Retention Credit. However, tribal governments and tribal entities may be Eligible Employers.

In general, for employment tax purposes, the IRS considers six factors in determining whether an organization is an instrumentality entity:

1. whether the organization is used for a governmental purpose and performs a governmental function;
2. whether performance of the organization’s function is on behalf of one or more States or political subdivisions;
3. whether there are any private interests involved, or whether the States or political subdivisions involved have the powers and interests of an owner;
4. whether control and supervision of the organization is vested in a public authority or authorities;
5. if express or implied statutory or other authority is necessary for the creation and/or use of such an instrumentality, and whether such authority exists; and
6. the degree of financial autonomy and the source of its operating expenses.

Are tax-exempt employers eligible for the Employee Retention Credit?
Yes, organizations described in section 501(c) of the Internal Revenue Code (the “Code”), and exempt from tax under section 501(a) of the Code, may be Eligible Employers for purposes of the Employee Retention Credit if they are employers that otherwise meet the requirements to be eligible for the credit.

Are tribal governments and tribal entities eligible for the Employee Retention Credit?
Yes. Any tribal government or tribal entity that carries on a trade or business may be an Eligible Employer for purposes of the Employee Retention Credit, if it otherwise meets the requirements for the credit.

When did you start your business?

A recovery startup business is an employer that began carrying on a trade or business on or after February 15, 2020. Therefore, the determination of when an employer "began carrying on a trade or business" is made in the same manner as found in the purposes of section 162. In general, for purposes of section 162, a taxpayer has not begun carrying on a trade or business "until such time as the business has begun to function as a going concern and performed those activities for which it was organized".

Great news! Based on your answers you qualify for the ERC Recovery Startup Business Credit. This credit applies for 3rd and 4th quarter of 2021. The credit is up to $50,000 per quarter. Click 'Continue' to provide your information.

Great news!

Based on your answers, you qualify for the ERC program!

This is an estimate based on the responses and employee counts provided and is not a guarantee of your credit amount or qualification. Many factors are evaluated during your ERC analysis. If we determine you qualify, this number could be much higher or lower.

Important

2019 full-time employees

A full-time employee is classified as someone that worked at least 30 hours per week, or 130 hours per month in 2019. Remember, this question is based on the average amount of employees during 2019.

Important: The IRS aggregate rule applies to the ERC credit. If your company has common ownership with other companies, please take into account all associated businesses when calculating this question. To learn more about this rule and if it applies to your business read here: What is an Aggregated Large Employer?

Example: The business owner was the majority owner of ABC Company, which averaged 50 FT employees in 2019. The same business owner was also the majority owner of 123 Company, which averaged 75 FT employees in 2019. According to the aggregate rule, the employee count of both companies must be combined for the ERC program. Although both companies can be entered for the program, they would both be classified as having over 100 employees.

Note: Businesses with over 100, but under 500 FT employees in 2019 do not qualify for ERC funds in 2020. Businesses with over 500 FT employees in 2019 do not qualify for the ERC program, except for actual wages paid to employees that did not work due to a government shutdown.

Part-Time Employees: Part-time employee wages do qualify for the ERC program. This question only requires full-time employee count to determine qualification.

ERC qualification options

There are three ways to qualify for ERC. Please answer the questions in the following sections to determine your eligibility for the program.

1. Revenue reduction
2. Supply disruption
3. Full or partial suspension

Revenue reduction

The most straightforward way to qualify for the Employee Retention Credit is from a qualified revenue reduction during the qualification period of the program.

Revenue reduction qualifications

• 2021 - 20% reduction of gross sales for the 2021 quarter as compared to the same quarter in 2019 (or 2020 if you were not in business during the quarter in 2019). The alternative lookback option allows the business to use the previous quarter compared to the same 2019 quarter to qualify.

Revenue reduction qualifications

• 2020 - 50% reduction of gross sales for the 2020 quarter as compared to the same quarter in 2019. When/if the revenue reduction in 2020 gets back to 80% of the 2019 level, the qualification ends.
• 2021 - 20% reduction of gross sales for the 2021 quarter as compared to the same quarter in 2019 (or 2020 if you were not in business during the quarter in 2019). The alternative lookback option allows the business to use the previous quarter compared to the same 2019 quarter to qualify.

Revenue reduction

Were your gross receipts (total deposits) for at least one quarter in 2020 less than 50% of your gross receipts for the same quarter in 2019?

Revenue reduction

Revenue reduction

Did your gross receipts get back to 80% of 2019 pre-COVID levels?

Revenue reduction

Q1 2021 revenue qualifier

2021 - Q1 Alternative Quarter Revenue Qualifier

Since you did not have a 20% revenue reduction in Q1 2021 as compared to Q1 2019, you can utilize the previous quarter to potentially qualify.

Q2 2021 revenue qualifier

Supply disruption

Supply chain disruption is a common qualification for businesses that rely on vendors and suppliers for their business to function properly. This qualification must have resulted from a government suspension order to your supplier that resulted in the supplier not being able to deliver critical goods, but may continue beyond the original suspension order. The specific requirements for this qualification are listed below.

These impacts qualify a company regardless of revenue gain or loss.

Please reference the IRS notices pertaining to supply chain disruption qualification: Notice 2021-11 & Notice 2021-20.

Supply disruption qualifications

• More than Nominal Impact - The supply chain disruption due to vendor shutdowns must have resulted in a more than 10% impact on your business. This can be directly from the reduction of sales from the inability to procure the supply item, or from the impact not being able to procure the item had on your business. To calculate the more than 10% impact, evaluate the impact of the supply item on your 2019 gross receipts. For example, if you were not able to procure pallets for the shipping of goods, consider how much of your business relied upon pallets in order to operate in 2019. If it was more than 10%, this qualification can apply.
• No Replacement Supplier - Your business must not have been able to find a reasonable replacement supplier for the supply item affected by the government suspension order.

Supply disruption

In which 2020 quarters was your business impacted more than 10% due to the cumulative impact of any disrupted supply items?
This does not mean revenue must have decreased during the 2020 quarters.

In which 2021 quarters was your business impacted more than 10% due to the cumulative impact of any disrupted supply items?
This does not mean revenue must have decreased during the 2021 quarters.

Full or partial suspension

The partial or full shutdown qualification is based on a "suspension test" to demonstrate that your operations were partially or fully suspended due to a Covid-19 governmental order. Keep in mind that a government restriction may have had a direct impact on your operations even though that shutdown order wasn't given to you directly.

Important: This qualification only applies during the period of the actual government order. Since there were very few government shutdown orders during 2021, the actual shutdown type of this qualification mainly applies to 2020 quarters. However, if the impact of shutdowns affected your business beyond the actual shutdown period, this qualification may apply.

Please reference the IRS notices pertaining to suspension qualification: Notice 2021-20, Notice 2021-23, Notice 2021-33 & Notice 2021-49.

Full or partial suspension qualification requirements

• More than Nominal Impact - The partial suspension from a government order must have had a more than nominal effect, which means it affected more than 10% of business operations. This impact can come from a reduction in business hours of 10% or more, or a suspension of your business operations that represented 10% or more of gross receipts as compared to 2019. (This does not mean that a 10% reduction in sales is required to qualify, but the order must have suspended at least 10% of your revenue-producing operations.)Hourly example: Government orders required a restaurant to close 2 hours early due to curfew requirements. The 2 hours represented 15% of the business working hours. This business qualifies for the period affected by the government order.Gross receipts example: Government orders required a radiology clinic to stop elective procedures during Q2 & Q3 of 2020. The business reviewed its gross receipts for Q2 & Q3 of 2019 and determined that the suspended elective procedures represented 18% of its total gross receipts during those quarters. This business qualifies for these two quarters.
• Inability to Convert to Telework - If the business was able to effectively convert to a remote work environment that mitigated the nominal impact on the business, they do not qualify for the suspension qualification.

IRS Examples 

1. An employer that operates an essential business is not considered to have a full or partial shutdown if government orders allow them to remain open. However, an employer that operates an essential business may be considered to have a partial suspension if more than a nominal portion of its business operations are suspended.
2. The partial suspension qualification applies if employers could not obtain telework capabilities that allowed their business to operate as usual (adequate IT support etc). It also applies if the employee's work was not portable, or the presence of an employee in the physical workspace plays a critical role.
3. If an employer's workplace is closed due to a government order for certain purposes, but the employer's workplace may remain open for other limited purposes, the employer's operations would be considered to be partially suspended if more than a nominal portion of the business cannot be performed.
4. A restaurant must close its on-site dining or every other table due to government orders but can still operate its drive-thru or carry-out service. This would be considered partially suspended.

Note: For any periods you qualify you will be required to provide a brief description of the more than nominal effect on your business to substantiate your claim.

Full or partial suspension

The cumulative effect of the full or partial suspensions must have had a more than 10% impact on your business operations when considering the gross receipts of that portion of your business in 2019. This does not mean that your revenue must have decreased to use this qualification.

In which 2020 quarters were you impacted by these suspensions?

In which 2021 quarters were you impacted by these suspensions?

Congratulations!

Based on your answers, you qualify for the following quarters!

Depending on your qualifications, you will see your substantiation statements below. These statements will be retained to substantiate your claim with the IRS.

Revenue Reduction Substantiation Statement

The statement below is for the first suspension only. The statements for additional suspensions will be identical, with the insertion of specific details for each suspension impact.

Full or Partial Suspension Substantiation Statement

The statement below is for the first suspension only. The statements for additional suspensions will be identical, with the insertion of specific details for each suspension impact.

Supply Chain Disruption Substantiation Statement