Was Your Business Impacted?
Even if your business grew or was deemed an essential business during the pandemic, there are more factors for which your business may qualify for the ERTC
Full or Partial Suspension
The partial or full shutdown qualification is based on a “suspension test” to demonstrate that your operations were partially or fully suspended due to a Covid-19 governmental order. Keep in mind that a government restriction may have had a direct impact on your operations even though that shutdown order wasn’t given to you directly.
Important: This qualification only applies during the period of the actual government order. Since there were very few government shutdown orders during 2021, the actual shutdown type of this qualification mainly applies to 2020 quarters. However, if the
impact of shutdowns affected your business beyond the actual shutdown period, this qualification may apply.
Please reference the IRS notices pertaining to suspension qualification: Notice 2021-23, Notice 2021-33, & Notice 2021-49.
Qualification Requirements
More than Nominal Impact – The partial suspension from a government order must have had a more than nominal effect, which means it affected more than 10% of business operations. This impact can come from a reduction in business hours of 10% or more, or a suspension of your business operations that represented 10% or more of gross receipts as compared to 2019. (This does not
mean that a 10% reduction in sales is required to qualify, but the order must have suspended at least 10% of your revenue-producing operations.)
Hourly example: Government orders required a restaurant to close 2 hours early due to curfew requirements. The 2 hours represented 15% of the business working hours. This business qualifies for the period affected by the government order.
Gross receipts example: Government orders required a dentist office to stop elective procedures during Q2 & Q3 of 2020. The business reviewed its gross receipts for Q2 & Q3 of 2019 and determined that the suspended elective procedures represented 18% of its total gross receipts during those quarters. This business qualifies for these two quarters.
- Businesses deemed essential – An employer that operates an essential business is not considered to have a full or partial shutdown if government orders allow them to remain open. However, an employer that operates an essential business may be considered to have a partial suspension if more than a nominal portion of its business operations are suspended.
- Inability to telework – The partial suspension qualification applies if employers could not obtain telework capabilities that allowed their business to operate as usual (adequate IT support etc). It also applies if the employee’s work was not portable, or the presence of an employee in the physical workspace plays a critical role.
- Change in operations – If an employer’s workplace is closed due to a government order for certain purposes, but the employer’s workplace may remain open for other limited purposes, the employer’s operations would be considered to be partially suspended if more than a nominal portion of the business cannot be performed.
- Change in services – A restaurant must close its on-site dining or every other table due to government orders but can still operate its drive-thru or carry-out service. This would be considered partially suspended.