ERC 2024: The Gross Receipts Test – ERC REVIEW and AUDIT DEFENSE

ERC 2024: The Gross Receipts Test – ERC REVIEW and AUDIT DEFENSE

by Dave Horwedel, EA

It would seem by reading IRS announcements that ERC Law has changed or that the IRS has recanted on their earlier IRS Guidance. This is not true.

Nothing has changed except the IRS has taken on a much sterner tone and is asking those who falsely claimed the ERC to voluntarily withdraw their claim.  The IRS is still processing and paying on ERC claims previously submitted.

If you review my websites and blogs, you will see I have been warning about improper ERC submissions.

The IRS would like to get as many claims voluntarily withdrawn as possible.  But let me reiterate. No ERC Law has changed. No IRS Guidance has been cancelled.  Do not make a hasty decision you may regret later.

One of the main tests of ERC eligibility is the Gross Receipts test.

Today we are going over the Gross Receipt test.

The other main test is the Partial Shutdown Test, which I will cover in my next blog post.

In the gross receipts test you compare the gross receipts of quarters 2, 3, and 4 of 2020 to the gross receipts of the same quarters in 2019. For 2020, you begin qualifying in the quarter when your gross receipts are less than 50% of the gross receipts for the same quarter in 2019. You no longer qualify in the quarter after the quarter in which your gross receipts are more than 80% of the same quarter in 2019.

For 2021, the gross receipts for the quarter must be less than 80% of the gross receipts for the same quarter in 2019. For calendar quarters in 2021, you can also use the alternative quarter election rule, which allows you to look at the prior calendar quarter and compare it to the same calendar quarter in 2019 to determine whether that quarter qualified.

The net result:  if you qualify for one quarter by the gross receipts test the next quarter automatically qualifies as long as it is before Q4 of 2021.

If you have received an audit or examinations letter the IRS thinks you may not have qualified. They do not know. They would have to request further data from you.

If you would like to have your ERC reviewed, or you have received an audit letter, contact Torchlight or GuardDog Tax for a free consultation at 1-877-758-7797, or email info@Torchlightax.com or info@GuardDogTax.com. We will discuss alternate ERC tests and recommend a course of action.

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