Last December Congress released the Consolidated Appropriations Act of 2021 which provided major tax breaks for companies that have found ways to come together with their teams to embody America’s commitment to innovation in the midst of the pandemic.
At the start of the pandemic, much of the world’s normal way of operating came to a screeching halt, but for the most part, the manufacturing industry did not. Rather, manufacturers had to deal head-on with the effects of the pandemic. Virus mitigation meant working in new ways whenever practical—more distance between workers, additional personal protective equipment, and regular shutdowns for deep cleanings and sterilizing the workplace. These practices didn’t contribute to efficiency, so the sector—which accounts for approximately 11% of the country’s gross domestic product—suffered. The need for innovation has never been greater. One could argue that the need for technical professionals has substantially increased over the last year alone, with the U.S. officially exiting the top 10 index for global innovation in 2021.
“During this crisis, America’s manufacturing workers mobilized in ways reminiscent of their resolve during World War II, when manufacturers became the arsenal of democracy,” said Jay Timmons, president/CEO of the National Manufacturer’s Association in his testimony for the U.S. Finance Committee’s Made-in-America hearing on March 16.
The spirit of America’s manufacturing workers has led our country through some trying times, so it’s no surprise to see companies showcase that same commitment to operate and grow during this crisis. Congress’s contribution is a strong foundation to provide more support to these companies so they are ready to rev up as the pandemic abates.
Substantial relief is available to the business owners who have kept U.S. manufacturing moving forward and workers employed. As part of the latest coronavirus relief bill, and previously included in the CARES Act, Congress approved the Employee Retention Credit (ERC), which is one of the largest credits available to business owners right now.
The ERC is exactly what it sounds like. Companies can receive a financial reward for every employee kept on payroll during the pandemic. Now that the credit has been extended through all of 2021, business owners and their advisors should prioritize an effective strategy to file for this credit before upcoming deadline—which was extended to May for certain business owners. The ERC can be claimed quarterly, so businesses should file as soon as possible to claim this credit and get the refund before May 17. Eligible wages for the remainder of the year can be claimed in 2022.
Any company that can demonstrate how the pandemic impacted its daily operations or output is well-positioned to receive funding. Dealing with supply-chain disruptions, altering work hours, complying with government-mandated shutdowns, and countless other factors could qualify your business for the ERC. To help get business owners back on their feet, funds received through the ERC can be used to offset, or potentially eliminate, payroll tax for business owners, and any remaining credits would be returned as a refund.
The ERC is substantial. It’s not uncommon to see a return of $250,000 for a 20- to 30-person workforce.
Many companies are reaping the benefits of the ERC, but as the program spreads, so does the misinformation that surrounds it. Some of this erroneous information causes companies to apply improperly or to disqualify themselves prematurely.
Consider these points when determining how and if this credit applies to your business:
- Companies that claim the Paycheck Protection Program also are eligible to claim the ERC and other incentives in tandem.
- Two factors make a company eligible: a drop in revenue and partial suspension of business operations.
- Even if your company grew during quarantine, you still could qualify for the ERC.
The list of myths about the ERC is lengthy. To learn about the most common ones, read “Employee Retention Credit: Top Ten Mistakes of Business Owners and Their Advisors” by Dean Zerbe, an occasional contributor to The Tube & Pipe Journal.
About the Author
Myron Moser is the Chairman of the Board of Hartfiel Automation in Minnesota. He joined Hartfiel Automation in 1990 and quickly rose in the ranks to the executive level in 1995 and is one of the top executives in the U.S. automation industry. Under his leadership, Hartfiel Automation has seen incredible growth, continuing to diversify its product offerings in hydraulics, aluminum extrusions, and robotics and automation solutions. His company has helped strengthen the American manufacturing industry through innovative solutions for more than 60 years. Myron will be helping alliantgroup by leveraging his decades of experience as a top executive in the world of automation for strategic benefit of alliantgroup’s clients and CPA partners.