Over the past few years, the Covid-19 pandemic has made it increasingly difficult for businesses to function and make a profit. Government restrictions were put in place to limit contact and keep the population safe. However, this had a huge effect on every business’ ability to make money, as they were faced with restrictions on opening hours and the number of customers that they were able to see each day.
This also came with secondary problems, such as having to pay bills and employees, despite the loss of turnover. Mrytha Chang, owner, and founder of Mathnasium struggled constantly to make ends meet.
“My tutoring business suffered huge financial losses because when people couldn’t afford to live due to their own job losses, the first thing they cut loose was their children’s extra tuition. There was also the issue of exam cancellations, which led lots of parents to believe that they didn’t need extra tuition for their children if they weren’t going to have to do exams anyway.”
Throughout this time, Mathnasium still needed to employ tutors. Ms. Chang went on to talk about her internal struggles, as she didn’t want to let any of her dependable employees go because it wasn’t their fault, but equally, her business would fall apart if she lost that much money without earning more.
“I had to consider whether I should keep some on and let others go, but as I looked to the future when the pandemic would have died down, I would have had to spend more money on recruitment and training and might not find the same caliber of people. For this reason, I decided to pay in spite of my struggles in the hope that the pandemic would be over soon, and everything would go back to normal.”
Ms. Chang did actually make the right call, as it turns out. Last year, the IRS launched a scheme to help business owners in this exact situation.
Employee Retention Credit was a lifeline for businesses in need. If the business continued to pay all of its employees throughout 2020, it would be able to claim back up to 50% of each employee’s wage for that year. The IRS became even more generous in 2021, increasing this to allow certain businesses to claim up to 70% of each employee’s wages per quarterback. These credits were capped at $10,000 per employee, but this still allowed for a significant amount of the wages that businesses paid out over this period to be claimed back.
While some businesses shied away from the concept, feeling it would just be too difficult to claim, other, supporting services opened their doors to help businesses understand the benefits of claiming and how to meet the criteria.
The Chief Revenue Officer from ERC Benefits spoke about the criteria and the ease of claiming if businesses knew what to look out for. He said, “Lots of business owners dismiss the idea, thinking that there will be a ton of hoops to jump through to claim, but that’s not the case at all. This scheme is actually meant to be helpful and support the economy to get back on its feet, meaning there are actually minimal requirements to qualify.”
In order to meet the criteria, your business must have suffered significant financial loss as a result of government restrictions. This means that each business must prove that they have made at least 20% less profit than they were forecast to make or have made in previous years.
Additionally, employers can only claim for the employees that they retained during this time, so they must also prove that they maintained the same number of employees throughout the period to claim.
For Ms. Chang, the significant amount that she was able to reclaim due to her retaining her workforce has almost restored her business to the state it was in prior to the pandemic, meaning she is able to function and trade as normal.
While the restrictions have now been lifted, businesses are still able to claim ERC right up until 2024. If you’d like more support or information on how to make a claim for Employee Retention Credit, ERC Benefits can provide expert advice and assistance. Contact ERC Benefits today on 561 68- 4677
