Many businesses are unaware that they can still qualify for the ERC even if they did not experience a revenue decline during the pandemic (or even if revenues increased!). In fact, Incentax has worked with many companies that initially believed they did not qualify, simply because their businesses did not fully shut down or their revenues didn’t decline. However, they often miss the partial business suspension rules, in which a company makes substantial changes in business operations to remain open and comply with COVID-19 government mandates.
Specifically, the confusion comes from the ERC ‘Full or Partial Suspension of Business Operations’ test. Under this test, a company is deemed an “eligible employer” if the business was (1) either fully or partially suspended, and (2) if the suspension was due to a government order related to COVID-19.
Many remain confused on how the Internal Revenue Code defines a “partial” or “full” suspension; this is because these terms are more complex than one would think. Of course, if you had to shut down, reduce hours, or otherwise close your business due to government mandates, you’d likely qualify.
However, this definition also includes businesses that modified operations due to a government order related to COVID-19. The key is always whether any shutdowns, contractions in operations, or substantial modifications are ‘due to a government order related to COVID-19.’ So, to be considered an “eligible employer” for the ERC, your modifications or closures must have been a direct result of a city, county, state, or federal mandate.
To see whether your business qualifies, you can ask a few simple questions:
- Was your business in an area where there were COVID-19 regulations (at either the city, county, or state level)?
- Did your business change the way it serviced customers or clients because of these government mandates?
- Did your business modify operations, including staffing or how employees completed their duties?
If so, your business may qualify for the ERC.
Still sound confusing? Don’t worry, you’re not alone! The experts here at Incentax are here to help. We work with you to scope out your business’s unique circumstances. We’ve reviewed hundreds of business scenarios from all over the country and have the insights needed to navigate your specific situation and determine if your company qualifies for the ERC. Contact us today to get a better understanding of Business Suspension under the ERC!