To be eligible for the Employee Retention Credit, a portfolio company must have full-time, W2 employees, and generally must fall into at least one of the two following categories:

• Your business(es) experienced decreased revenue during quarters 1-4 in 2020 and 1-3 in 2021, compared to 2019
• Your business(es) suffered from any number of government-mandated restrictions

Government-mandated restrictions may include a wide range of things that your business experienced. Examples can include but are not limited to, full or partial shutdowns, social distancing or capacity limitations, and the requirement of remote work, among others.

On top of this, business owners of portfolio companies may wonder if they are still eligible for ERC after receiving the Paycheck Protection Program (PPP) loans in 2020 or 2021. Regardless of whether you received PPP 1 and/or 2, you may have eligibility for ERC. Speaking with an experienced CPA about your portfolio company’s situation and experiences can help you to understand if your business may be eligible for ERC.

While many businesses, unfortunately, saw a decrease in their revenue during the pandemic, it is possible that your business managed to increase revenue. If you had an increase in revenue, you may still be eligible for ERC, assuming you were affected by government-mandated restrictions. If your portfolio company had an increase in revenue, consult with a trusted CPA to determine your ERC eligibility. 

If you have already submitted a claim for the Employee Retention Credit for your business, you are probably wondering how long you should expect to wait until receiving the tax credit. Ultimately, each case is unique and is going to have a different timeline. Due to so many businesses being affected by the pandemic, the IRS is currently dealing with a high volume of applications. Your ERC refund may be processed in about 8 months, although there is potential for it to take longer. 

If you wish to see the status of your refund, you may use the “Where’s My Refund?” feature on the IRS website, or call the IRS.

Claiming the Employee Retention Credit can be a needed relief for many private equity portfolio companies, but it is important to make sure you and your tax planners are thorough and diligent when examining your eligibility. It is crucial to note that the IRS will carefully examine your claim for this credit. ERC claims with falsified information can lead to compliance risks such as ERC audits in the future, setting up a potential disaster.

Strategic Tax Planning’s experienced CPAs and tax professionals will work closely with you and your business, ensuring all ERC qualifications and facts are accurate and in order. We are here to help you receive your deserved relief for persevering during difficult financial times.