Employee Retention Credit Phone Call Scam

COVID-19 has caused hardships and unprecedented challenges for businesses and organizations all over the world. Lockdowns, social distance, health and security measures and lockdowns have caused many employers to face reduced revenue, increased expenses and disruptions in their operations.

To help employers retain their employees and provide them with health benefits during this difficult time, the U.S. government has introduced the Employee Retention Credit (ERC), a refundable tax credit that can offset some of the payroll costs for eligible employers.

The ERC is a program that was introduced by the CARES Act of 2020. Subsequent legislation was passed in 2021 and in 2023 to extend and modify it. This article will explain what the ERC is, how it works, and how to claim it for different time periods and eligibility criteria.

For a brief reading of what the Employee Retention Credit or ERC is, take a look at this video from the YouTube channel “ERC Specialists”. You can also continue below to read an in-depth explanation of ERC.

What is Employee Retention Credit (ERC)? Employee Retention Credit Phone Call Scam

Employee Retention Credit (ERC), a refundable tax credits, is available for tax-exempt businesses or organizations with employees that were affected in any way by the COVID-19 Pandemic. The ERC is a refundable tax credit that was created by 2020’s CARES Act and has been extended and changed by subsequent legislations of 2021 and 2023. The ERC was created to encourage employers in crisis to keep workers on their payrolls and provide them health insurance.

Main Features and Benefits

Credits are equal to a percent of the qualified wages and costs for health insurance paid to eligible employees up to a limit per employee each quarter.
The percentage and limit will vary depending on when the credit is claimed. In 2020, the 50% percentage and $5,000 limit per employee is applicable for the entire calendar year. For 2021, the percentage will be 70%, and the limit per quarter is $7,000 for each employee. For 2023, the percentage is 70% for the first two quarters and 40% for the last two quarters, and the limit is $10,000 per employee per quarter. Employee Retention Credit Phone Call Scam
The credit is fully refundable. If the amount of credit exceeds an employer’s liability for payroll tax, the excess will then be paid back to the employer.
The credit can be claimed by employers who experienced a significant decline in gross receipts or a full or partial suspension of operations due to a qualifying government order related to COVID-19. The credit can be claimed by employers who have been classified as recovery startups only until 2023.
Credits can be claimed either by amending your employment tax return (Form 941)-X or by reducing your employment tax deposit in anticipation of receiving the credit. Employers can also request an advance payment of the credit by filing Form 7200.

> > Click Here to Find Out if You are Eligible for ERC < <

Eligibility Criteria

To qualify for Employee Retention credit (ERC), employers must meet either of two main criteria.

A government order suspended the employer’s organization or business in full or part due to COVID-19 for a calendar quarter of 2020 or 2021
The employer’s gross receipts for a calendar quarter in 2020 or 2021 were less than 50% (for 2020) or 80% (for 2021) of its gross receipts for the same quarter in 2019

There is also a special rule that applies to recovery startups, which are businesses that started operations after February 15th 2020 with gross receipts no higher than $1,000,000 on average. These businesses are eligible for the ERC, regardless of whether their business has been suspended or if revenue has declined.

Business Suspension

A government order will either fully or partially suspend an organization or business if:

The order prohibits travel, group meetings, and commerce due to COVID-19
The order has an impact on the business or organization
This order is applicable to any calendar quarter of 2020 or 2021

Examples of government orders which can lead to a suspension of business include:

Stay-at-home orders restricting non-essential business operations
Curfews are restrictions on the hours that certain businesses can operate
Limits in capacity that restrict the number or clients that a business can serve
Travel restrictions or bans that impact the ability of an organization to transport goods and services

To determine if the business was partially or fully suspended by an official order, employers must consider:

The order’s nature, scope, and impact on the business
The duration and frequency of the order and how it coincides with the calendar quarters
The extent and severity of the impact of the order on the revenues and expenses of the business

Revenue Decline

It is considered that a business or organization has experienced a significant drop in gross receipts when:

The gross receipts in any calendar quarter of 2020 will be less than 50% the gross receipts in the same quarter of 2019.
The gross receipts of any quarter in calendar 2021 were below 80% of the gross receipts in the same quarter for 2019.

Gross receipts can be defined as all the money received by an organization or business from any source during their annual accounting period, without deductions. Gross receipts include the following:

Sales of goods & services
Dividends, rents, and royalties, as well as interest, are all examples of annuities.
Contributions, gifts and grants Employee Retention Credit Phone Call Scam
Membership fees and dues
Gross business income

To calculate and compare gross receipts for different quarters, an employer must use:

It should use the same method of accounting, either cash or accrual, that it used for its federal income tax returns for 2019.
It will use the same calendar year quarters for 2019/2021 as it did to file its federal Employment Tax Returns (Form 941).
The same sources of revenue that they reported on their federal income tax return in 2019

Recovery Startup Business

The recovery startup business is one that:

Start any new business or occupation after February 15, 2019,
The average annual gross receipts for the three tax years ending in the year preceding the quarter for which credit is calculated cannot exceed $1 million

If a business is in recovery, it can still qualify for ERC even if the business has been suspended or its revenue has declined. Recovery startups are not exempt from certain rules and restrictions.

The maximum credit per quarter will be $50,000
The credit is only available for wages paid in the third and fourth quarters of 2021
The credit is subject to an overall cap of $250 million for all recovery startup businesses

> > Click Here to Find Out if You are Eligible for ERC < <

Credit Amounts and Calculation

ERCs have different rules and amounts depending on the length of time and type of employer. The ERC is affected primarily by:

How much the employer’s business was affected by the pandemic, either by having to close or reduce operations due to government orders or by having a big drop in income compared to 2019
What number of employees did the employer have in 2019 and 2020/2021?
The amount of money paid by the employer to each employee as well as their health insurance during pandemic

In order to receive the ERC from the IRS, the employer will need to complete some forms. The forms must include the total amount paid by the employer to employees, their health insurance coverage and the reasons why they are eligible for the ERC. The IRS will review the forms and pay the money back to the employer. The employer can then use the money for paying their employees, their health insurance and/or to receive refunds or credits on their payroll tax.

The ERC will not be available indefinitely. The ERC began in March 2020, and it will end in September 2022. The employer must claim ERC before the expiration date or when it becomes unavailable. The employer should also make sure to not waste the money. Employee Retention Credit Phone Call Scam

Below you will find detailed information on ERC, including the amount of credit and the calculation.

Time Period

The ERC was implemented, amended, or terminated by various laws in 2020. The credit amount varies depending on the time period for which it is claimed. The following table summarizes and compares the ERC’s main features for each period:

Time Period	Law	Eligible Employers	Credit Rate	Qualified Wages
2020	CARES Act	Employers with business suspension or revenue decline of more than 50%	50% of qualified wages up to $10,000 per employee per year	Wages paid from March 13 to December 31, 2020
Q1-Q3 2021	CAA and ARPA	Employers with business suspension or revenue decline of more than 20%	70% of qualified wages up to $10,000 per employee per quarter	Wages paid from January 1 to September 30, 2021
Q3-Q4 2021 (Recovery Startup Business)	ARPA	Recovery startup businesses with average annual gross receipts of no more than $1 million,	70% of qualified wages up to $10,000 per employee per quarter (subject to a $50,000 cap per quarter),	Wages paid from July 1 to December 31, 2021,
Q4 2021 – Q3 2022 (Severely Financially Distressed Employer)	ARPA and IIJA	Employers with a revenue decline of more than 90%	70% of qualified wages up to $10,000 per employee per quarter	Wages paid from October 1, 2021, to September 30, 2022

Number of Employees

The number and type of employees can affect the definition and calculation for qualified wages and health care costs. The size of an employer depends on its number of FTEs and the time period. The following table summarizes rules and thresholds to determine employer size.

Time Period	Small Employer Threshold	Large Employer Threshold
2020	Less than or equal to 100 FTEs in 2019	More than 100 FTEs in 2019
Q1-Q2 2021	Less than or equal to 500 FTEs in 2019	More than 500 FTEs in 2019
Q3-Q4 2021	Less than or equal to 500 FTEs in any calendar quarter in either calendar year beginning after December 31, 2019, and ending before July 1, 2021. If an employer did not have in either calendar year beginning after December 31, 2019, and ending before July 1, 2021, the employer is treated as a small eligible employer if it had less than or equal to 500 FTEs in any calendar quarter beginning after June 30, 2021. For recovery startup businesses, the employer size is irrelevant. For severely financially distressed employers, the employer size is irrelevant if the employer had a revenue decline of more than 90%. Otherwise, the same rules as Q1-Q2 2021 apply.	More than 500 FTEs in any calendar quarter in either calendar year beginning after December 31, 2019, and ending before July 1, 2021. If an employer did not exist in either calendar year beginning after December 31, 2019, and ending before July 1, 2021, the employer is treated as a large eligible employer if it had more than 500 FTEs in any calendar quarter beginning after June 30, 2021.

To count FTEs for a given year or quarter, an employer must use the following steps:

Count the number of employees who worked at least 30 hours per week (or at least 130 hours per month) for each month in the year or quarter
Add up the total hours worked by all other employees (who are not counted as FTEs) for each month in the year or quarter
Divide the total hours by120and round down to the nearest whole number
Add the number of FTEs from Step One and Step Three for each month in the year or quarter
Calculate the average number of FTEs by adding up the monthly totals and dividing by 12 (for a year) or 3 (for a quarter)

Qualified Wages and Health Insurance Costs

Qualified wages refer to wages paid during a period when the business is suspended or revenues are declining. Qualified wages can include severance payment, bonuses, severance tips, sick pay, family pay and other forms compensation. Qualified wages include health insurance costs for eligible employees such as co-pays and deductibles.

The employer size, the time period and the calculation of the qualified wage and health insurance cost will affect the calculation. The following table provides a summary of the rules for different scenarios. Employee Retention Credit Phone Call Scam

Employer Size	Time Period	Qualified Wages and Health Insurance Costs	Example
Small	2020	All wages and health insurance costs paid to any employee, regardless of whether the employee worked or not	An employer with 80 FTEs in 2019 paid $8,000 in wages and $2,000 in health insurance costs to an employee in 2020. The employer had a revenue decline of more than 50% in Q2 2020. The qualified wages and health insurance costs for Q2 2020 are $10,000.
Small	Q1-Q3 2021	All wages and health insurance costs paid to any employee, regardless of whether the employee worked or not	An employer with 400 FTEs in 2019 paid $12,000 in wages and $3,000 in health insurance costs to an employee in Q1 2021. The employer had a revenue decline of more than 20% in Q1 2021. The qualified wages and health insurance costs for Q1 2021 are $15,000.
Small	Q3-Q4 2021 (Recovery Startup Business)	All wages and health insurance costs paid to any employee, regardless of whether the employee worked or not (subject to a $50,000 cap per quarter)	A recovery startup business that began operations in March 2020 paid $9,000 in wages and $1,000 in health insurance costs to an employee in Q3 2021. The business had average annual gross receipts of $800,000. The qualified wages and health insurance costs for Q3 2021 are $10,000.
Small	Q4 2021 – Q3 2022 (Severely Financially Distressed Employer)	All wages and health insurance costs paid to any employee, regardless of whether the employee worked or not	An employer with 600 FTEs in Q2 2019 paid $11,000 in wages and $4,000 in health insurance costs to an employee in Q4 2021. The employer had a revenue decline of more than 90% in Q4 2021. The qualified wages and health insurance costs for Q4 2021 are $15,000.
Large	2020	Wages and health insurance costs paid to an employee for the time that the employee did not work (up to the amount that the employee would have been paid for working an equivalent duration during the 30 days immediately preceding the period of economic hardship)	An employer with 120 FTEs in 2019 paid $10,000 in wages and $2,000 in health insurance costs to an employee who worked full-time (40 hours per week) in 2020. The employer had a business suspension due to a government order in April 2020. The employee did not work for two weeks in April 2020. The qualified wages and health insurance costs for April 2020 are $2,308 ($10,000 x2/52+$2,000 x2/52).
Large	Q1-Q3 2021	Wages and health insurance costs paid to an employee for the time that the employee did not work (up to the amount that the employee would have been paid for working an equivalent duration during the 90 days immediately preceding the period of economic hardship)	An employer with 550 FTEs in 2019 paid $15,000 in wages and $5,000 in health insurance costs to an employee who worked full-time (40 hours per week) in Q1 2021. The employer had a revenue decline of more than 20% in Q1 2021. The employee did not work for three weeks in Q1 2021. The qualified wages and health insurance costs for Q1 2021 are $5,769 ($15,000 x3/13+$5,000 x3/13).
Large	Q3-Q4 2021 (Severely Financially Distressed Employer)	All wages and health insurance costs paid to any employee, regardless of whether the employee worked or not (only if the employer had a revenue decline of more than 90%. Otherwise, the same rules as Q1-Q32021 apply.)	An employer with 700 FTEs in Q4 2019 paid $12,000 in wages and $6,000 in health insurance costs to an employee who worked full-time (40 hours per week) in Q4 2021. The employer had a revenue decline of more than 90% in Q4 2021. The qualified wages and health insurance costs

> > Click Here to Find Out if You are Eligible for ERC < <

Claim and Report the Credit

For an employer to claim the Employee retention credit (ERC), they must submit a federal employment return (Form 951) or a revised employment tax report (Form 941X) to the Internal Revenue Service. The employer has to report each quarter the wages and costs of health insurance paid to employees who are eligible and the credit claimed.

Form 941

Form 941 is used to report the employer’s quarterly federal tax liability, including income tax, social security tax, and Medicare tax. The employer can also claim the ERC in Form 941 for future or current quarters. The employer can use the Form 941 for:

ERCs can be used to reduce the amount of tax that an employer must pay to the IRS.
If the ERC is greater than the tax that the employer must deposit, you can request an advance payment. Employee Retention Credit Phone Call Scam
You can carry forward any credit balance to subsequent quarters

Employers should avoid these common mistakes when filling out Form 941 and ensure that they are filled out correctly.

Use the most recent version of Form 941, which reflects any changes or updates to the ERC laws.
Use the IRS worksheets and instructions to calculate and report the ERC
Use Line 11c to report the qualified wages and health insurance costs paid to eligible employees
Use Line 13d to declare the credit amount claimed for each quarter
Use Line 13f to declare any advance payments received from the IRS.
Use Line 24 if you require an advance credit payment.
Use Line 25 to report any credit excess that can be carried over to the next quarter.
Sign the form 941, and attach any supporting documents.

You can find some helpful tips on how to fill out Form 941 here:

Use electronic filing services (efile) and online services to submit the Form 941 faster, more securely
Updates, FAQs, and guidance about Form 941, the ERC, and other IRS forms can be found on the IRS website.
Contact the IRS or a tax professional for assistance or clarification if needed

Form 941-X

The Form 941 X is used for corrections and adjustments to a Form 941. The employer can also claim the ERC retroactively by using Form 941X. Employers can use Form 941/X for Employee Retention Credit Phone Call Scam

Claim the ERC to get a refund of taxes that you have overpaid.
Report any additional wages or health insurance costs that are paid to employees who are eligible but not reported on Form 951.
Correct any errors or omissions you find on Form 941, which may affect your credit claim.

Employers should avoid these common mistakes when filling out Form 941 X and ensure that they are filled out correctly.

Use the latest form 941X that reflects changes to laws that are applicable to the ERC.
Use the IRS worksheets and instructions to calculate and report the ERC
Use Part 2 for indicating which lines of the Form 941 need to be corrected or adjusted
Use Part 3 for explaining why form 941 has been corrected or adjusted
Use Line 24 to report any additional qualified wages and health insurance costs paid to eligible employees
Use Line 25 to claim any additional credit for each quarter.
Use Line 26 to report any credit or refund due to the ERC claim.
Sign and date Form 941, and attach any supporting documentation or schedules

Some tips and resources for filling out Form 941-X are:

Fill out a separate form 941-X per quarter being corrected or recalculated Employee Retention Credit Phone Call Scam
Fill out Form 941-X immediately after you find an error in Form 941
Visit the IRS website to get the latest updates, FAQs, and guidance regarding Form 941-X, the ERC, and other forms.
Contact the IRS or a tax professional for assistance or clarification if needed

Deadline and Statute of Limitations

The deadline to submit Form 941 is usually the last day in the month following each quarter. For example for Q1 (2021) (January – March), Form 941 should be submitted by April 30, 2019. However, if an employer made timely deposits of all taxes due for a quarter, it can file Form 941 by the 10th day of the second month. The following quarter. For example, for Q1 2021 (January-March), Form 941 is due by May 10, 2021, Employee Retention Credit Phone Call Scam

The deadline to file Form 941-X generally is three years after the date the original Form 941 is filed, or two years after the date the tax is paid. For Q1 2020 (January – March), for example, Form 941 is due on April 30, 2020. If an employee filed Form 941 in April 2020 and paid their tax in April 2020, the deadline to file the Form 941 X is April 30 2023. If an employee filed Form 941 April 30, 2020 and paid tax June 15, 2020 the deadline for submitting Form 941 X is June 15, 222.

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Conclusion

Employee Retention (ERC) Credit is an important tax benefit which can help employers that were affected by COVID-19 to retain their employees, and lessen the impact the pandemic had on their organizations or businesses.

The ERC, a refundable credit, varies according to the time period and number of employees as well as the amount of qualified wage and health insurance expenses paid to employees who are eligible. The ERC credit can be claimed with IRS Forms 941 or 941X by reporting to them the qualified health insurance and wages costs as well as the amount claimed each quarter.

If you are an employer who meets the eligibility criteria for the ERC, you should not miss this opportunity to take advantage of this tax benefit. The ERC will not be available indefinitely, and it has a set deadline and statute of limitations. The forms should be filed as soon as you can. You can use the resources and advice provided in this post to avoid common mistakes and fill them out correctly. For clarifications or help, you can always contact an IRS agent or tax professional.

ERCs can be a huge help to your organization or business and its employees. It can help you retain your workers, maintain your cash flow, and recover from the pandemic. We hope this article has helped you understand more about the ERC and how to claim it. Thanks for reading and please stay safe.

> > Click Here to Find Out if You are Eligible for ERC < <

Employee Retention Credit Phone Call Scam

What is ERC and what does it do?

Employee Retention Credit (ERC) is a tax incentive for employers that retained their employees on their payrolls during the COVID-19 Pandemic.

The CARES Act, passed by Congress in March of this year, was amended in December of that year by the CAA Act. In March 2021, the ARPA Act (American Rescue Plan Act of 2021), was extended.

Does everyone qualify for the ERC program?

The ERC is not available to everyone. Employers who retained their employees and paid them wages between March 13, 2020, and December 31, 2021, are eligible.

The criteria for eligibility is also listed above. For the highlights, please see:

The business or organization was suspended (fully or partially) by government order due to the COVID-19 pandemic.
Their gross receipts in a quarter of 2020 or 2021 are less than the percentage of their gross revenue in the same quarter of 2019.
They are a recovery startup business that began operations after February 15, 2020, and has average annual gross receipts of no more than $1 million.

How much does the ERC cost?

The amount that an organization or company receives in ERC will depend on many factors.

Among these factors are the time period, employee count, amount of qualifying wages and health insurance cost paid to eligible workers. For a detailed explanation of ERC, you can read the article mentioned above.

How do I claim my ERC?

For an employer to claim the ERC, they must file either a federal reform of employment tax or an amended employment tax return (941-X).

The employer must provide a quarterly report detailing the wages, health insurance and other costs that are eligible for credit as well as the amount claimed.

When is the Deadline for Filing the ERC Forms?

The deadlines for filing ERC forms for Forms 941 and form 941 X are different.

Form 941 deadline is typically the last of the month following each quarter. Meanwhile, the deadline for Form 941-X is generally three years from the date that the original Form 941 was filled. It is also possible to choose a date of two years following the date on which the tax was paid.