Manufacturing

Because ERC funds can be used at your discretion, you can utilize them the best way you see fit, whether that’s hiring more employees, upgrading equipment, purchasing new technology or restoring your supply chain. Another idea? Utilize the ERC refund to conduct comprehensive training or invest in development programs for your employees.

Your manufacturing business may be eligible for the ERC if its operations were fully or partially suspended by governmental COVID-19 orders, thereby limiting commerce, travel or group meetings. Or, it might be eligible if it experienced a significant decline in gross receipts during 2020 or within the first three quarters of 2021. New startup businesses that began operations after February 15, 2020, may also qualify, regardless of revenue. There are two main ways to be eligible for stimulus refunds:

• If your business matches the required decline in revenue within any quarter of 2020 or 2021.
• If you have W-2 employees.

The answer to this question varies from 2020 to 2021. An employer had a significant decline in gross receipts in 2020 during the first calendar quarter for if its gross receipts for that quarter were less than 50 percent of those for the same calendar quarter in 2019. An employer had a significant decline in gross receipts in 2021 during the first calendar quarter for its gross receipts for that quarter if they were less than 80 percent of those for the same calendar quarter in 2019.

For 2020, the ERC is a credit against certain payroll taxes of 50 percent of the wages paid — up to $10k per employee — from March 12 – December 31, 2020 (capped at $5k per employee). For 2021, the ERC is a quarterly tax credit of 70 percent of the first $10,000 in wages per employee in each quarter of 2021 from January to September 2021 (capped at $7K per employee per quarter).

We have a list of state-specific COVID-19 orders on the Insights page of our website. Just click on your state to see the applicable orders and restrictions.

Manufacturing employers must first determine their eligibility, starting by ensuring they meet IRS qualifications. To retroactively claim the ERC, amend previously submitted Forms 941 by filing and submitting Form 941-X for each qualifying quarter. Manufacturing a refund through the Employee Retention Tax Credit can be complex. That’s why it’s best to collaborate with a team of experienced tax professionals like those here at StenTam. We’ll not only ensure you receive the maximum credit you’re owed but also guide you through the process to ensure compliance and minimize risk. We even have resources that enable you to track your refund.  Contact us today to get started!

To qualify for ERC, you need to have been subject to a qualifying government order related to COVID-19 that caused a full or partial suspension of your trade or business operations. The government order may be at the local, state, or federal level.

Examples of governmental orders:

• An order from the city’s mayor stating that all non-essential businesses must close for a specified time period;
• A state’s emergency proclamation that residents must shelter in place for a specified period, except for essential workers;
• An order from a local official imposing a curfew on residents that impacts the operating hours of your trade or business for a specified time period;
• An order from a local health department mandating a workplace closure for cleaning and disinfecting.

No. To qualify for the ERC, you must have been subject to a government order that fully or partially suspended your trade or business.
Recommendations or statements encouraging you to take certain actions are not orders.
If you use a third party to calculate or claim your ERC, you should ask them to give you a copy of the government orders – not a generic narrative about an order. Read the order carefully and make sure it applied to your business or organization.

No. You need to demonstrate that the government order was related to COVID-19 and that it resulted in your trade or business being fully or partially suspended.

Whether your business or organization was fully or partially suspended depends on your specific situation. For examples, see Notice 2021-20, Part III, Section D.

Some examples of who doesn’t qualify under this eligibility factor:

• If all your employees were able to telework during the pandemic and your business continued to operate, your business wasn’t suspended.
• If your customers were affected by a stay-at-home order, but no orders applied to your business operations, you weren’t suspended.
• If you voluntarily closed your business or reduced hours of operation, you weren’t ordered to suspend.

You could still qualify for ERC based on a decline in gross receipts even if you don’t qualify under suspension of operations due to government order.

A supply chain issue, by itself, does not qualify you for the ERC.

The IRS provided a narrow, limited exception if an employer was not fully or partially suspended but their supplier was. However, it applied only when the employer absolutely could not operate without the supplier’s product and the supplier was fully or partially suspended themselves.

In addition to having the supplier’s governmental order, you will need to show that:

• The government order caused the supplier to suspend operations,
• You couldn’t obtain the supplier’s goods or materials elsewhere (regardless of cost), and
• It caused a full or partial suspension of your business operations.