Telework. Remote working. Work from home. And now, Return to Office. These are all hot-button topics in the news of human resources and business operations we’re seeing every day since the advent of the COVID crisis.

Some CEOs are making big headlines out of their demands for their employees to return to the office. Others are calling themselves disrupters for their new thinking on the matter, allowing all but the absolutely necessary staff to work remotely or from home, or from wherever they choose.

And how businesses are dealing with that spectrum or dealt with that spectrum since March 2020, is a question that is having a clear impact on whether or how they apply for the ERC credit under the CARES Act, a federal law passed to help, specifically small businesses deal with the sometimes existential threat of the pandemic.

What you need to know
The questions are wide and varied, but in order of priority, here’s a list of questions and answers that should help you as you start to navigate the ERC application process.

What is the ERC credit?
The ERC program was created as a part of the federal government’s CARES act, a response to the business and financial stresses caused by the COVID-19 response. As businesses were forced to close and partially close for safety reasons, the ERC program has enabled businesses that remained open and employing people to reclaim a tax credit of up to $26,000 per W2 employee.

Who’s eligible for it?
There are three different ways to qualify. First, any American business that experienced a precipitous drop in gross receipts in 2020, 2021, and/or 2022 compared to the same quarter in 2019 can qualify based on revenue reduction. Second, businesses can qualify based on supply chain disruptions caused by government orders that impacted their businesses by more than 10 percent. Thirdly, if your company experienced partial shutdown impacts from things like travel restrictions, reduction in capacity, or reduction in hours, you may qualify.

Is my company too big to qualify?

The ERC is designed to help those small businesses who kept their staffs on payroll during the toughest times of the COVID crisis. Small employers are those with fewer than 100 employees in 2020 and fewer than 500 employees in 2021. Larger employers normally do not qualify.

What if I sent my employees off to work from home – or otherwise remotely – during the pandemic?
If you had a reduction in gross receipts, as compared to 2019, of 50% during 2020 or 20% during 2021, where your employees worked during the pandemic is irrelevant to your eligibility for the ERC credit. If you were able to transfer all of your business to remote working and, at the same time, continue to earn the same kind of revenue, you likely will not qualify.

What if we worked remotely and were still impacted by COVID restrictions?

If you allowed your employees to work remotely and you experienced other impacts of COVID shutdowns due to things like cancelled tradeshows, reduction in capacity or reduction in the services you were able to offer, you may still qualify. It’s always worth a conversation with an ERC specialist to learn how the ERC rules may apply to your business.

What about my part-timers?
The ERC credit is designed to incentivize keeping your personnel on payroll, and this does include part time workers. The wages you paid to your part-time W-2 employees will count toward your calculation and may help you qualify for a higher amount of credit.

Can I handle my ERC application myself?
We regularly hear from clients that their in-house tax experts or contract CPA firms recommend working with ERC Specialists rather than attempting to handle their applications in-house because the details and nuances are very complex. The application process is well-documented and available online, but the CARES Act has evolved over time, and many of the details are challenging to navigate unless you have specific experience.

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