Manufacturers May Have Overpaid Their Payroll Taxes
The COVID pandemic created new challenges for American businesses across all industries, and manufacturing companies were hit especially hard. According to the National Association of Manufacturers, about 1.4 million U.S. manufacturing jobs were lost during the pandemic. Data also shows the industry is currently recovering from those losses by making rapid hiring efforts.
To help support their recovery and stimulate the economy, eligible manufacturing companies can claim the Employee Retention Credit (ERC), a pandemic relief tax credit initially created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020. Through the ERC credit, businesses can receive a payroll tax refund, in the form of a check, from the Department of Treasury worth thousands or even millions of dollars.
Interestingly, in a recent survey commissioned by Omega Accounting Solutions, researchers found that many manufacturers have not yet utilized their ERC opportunity. But why are executives missing the benefits of the ERC for manufacturers? A large number of business owners, accountants, and tax specialists were misinformed by outdated guidelines and falsely believe they don’t qualify.
Receiving PPP funds does not disqualify a company. If a business grew its revenue during the pandemic, it may still be eligible for an ERC refund. Businesses that were deemed essential and never fully shut down can qualify as well. It’s much easier to qualify for the Employee Retention Credit than many business owners realize.
Why Manufacturers Should Claim the ERC Now
Congress updated ERC eligibility guidelines multiple times in the past two years, and because of that manufacturing executives should take another look at their ERC qualifications. Manufacturers that never looked into it, should as well. This is an opportunity to increase financial resources through a temporary stimulus program designed for small-to-medium-sized businesses. Executives should not miss out on the benefits of the ERC for manufacturers. Here are three reasons to claim the Employee Retention Credit now.
1. Business Owners Could Receive up to $26,000 Per Employee
When first introduced as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act in 2020, the maximum credit allowable under the ERC was $5,000 per employee. With its renewal and expansion last year under the Coronavirus Response and Consolidated Appropriations Act, the full credit increased by an additional $21,000 per employee.
Many business owners’ favorite feature is that it’s not a future credit against next quarter’s tax liabilities — it’s a refund paid with a paper check mailed from the Treasury Department. Not all businesses will qualify for the maximum amount, but it can still make a world of difference to a company’s bottom line.
2. Many Manufacturers Likely Qualify
ERC qualifications favor manufacturing companies that either lost income or were impacted by government orders during the pandemic — especially those with less than 500 employees. If your business meets just one of the following qualifications, it is likely eligible to claim the ERC.
Substantial Decline in Revenue
The easiest way for manufacturers to qualify for the employee retention credit is with a decline in revenue. Manufacturers that lost income in 2020 or 2021, when compared to the same quarter in 2019 can qualify for ERC.
Originally businesses had to experience a 50% revenue decline from 2019 to 2020, quarter for quarter. That threshold was substantially lowered to a 20% decline in 2021 when compared to the corresponding quarter of 2019. Please note that only the first 3 quarters of 2021 are eligible.
Manufacturers that did not see a revenue decline — even those that grew their business during the pandemic — may still be eligible for the ERC.
A Government Order Impacted Business Operations
Many manufacturing companies had to comply with pandemic government orders that forced them to modify procedures, making it more difficult (and more expensive) to operate.
Manufacturers in most states faced disruptive government mandates while already dealing with economic and staffing issues. You likely qualify for the ERC tax credit if pandemic-related government orders disrupted your manufacturing operations in one of the following ways:
- A decrease in production
- Full or partial shutdown of your operations
- Reduced indoor capacity
- You had to stagger crew working times
- Space out your crew on the assembly line (social distancing)
3. The ERC Filing Window Begins to Close in Early 2023
Time is quickly running out to claim a refund on 2020 payroll taxes. The ERC filing window begins to close with a rolling sunset deadline starting March 31st, 2023. After this date, you can no longer claim the tax credit for quarter one of 2020, and each quarter that goes by is another quarter you lose a potential credit.
While the Employee Retention Credit is scheduled to sunset throughout 2023 and ‘24, Congress has the power to end this pandemic tax credit at any time — hence why it’s so important to file now, while you still can.
Claim Your Credit With an Experienced ERC Provider
As a manufacturing executive, you work hard to give your business every possible advantage. Don’t disregard this temporary tax refund without checking if you qualify. Omega Accounting Solutions can quickly determine if your company is ERC-eligible, and handle the entire filing process for you.
Omega has been in business for almost 16 years and has experience in multiple tax incentives for industrial manufacturers. Omega’s tax credit experts have already filed ERCs for thousands of clients. They handle the entire process from start to finish including document collection, financial & impact analysis, credit calculations, ERC filing, and follow-up documentation. They perform due diligence on your company’s financial picture to ensure compliance with ERC qualifications.
Executives should not miss the benefits of the ERC for manufacturers. Contact Omega today to find out if your manufacturing company qualifies for the Employee Retention Credit.