The Gross Receipts Test:

You may qualify for ERC if your business experienced a significant decline in gross receipts during 2020 (March to Dec) or a decline in gross receipts during the first three quarters of 2021.

Generally, this test is met by comparing the gross receipts of the calendar quarter in which ERC is considered to the gross receipts of the same calendar quarter in 2019.

For 2020, you begin qualifying in the quarter when your gross receipts are less than 50% of the gross receipts of the same quarter in 2019. 

For 2021 - this changes to a 20% drop.

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.

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.  This order must DIRECTLY impact your business operations.  A SHUTDOWN ALONE DOES NOT QUALIFY YOU!  AFTER THE SHUTDOWN QUALIFICATION YOU MUST PROVE THIS RESULTED IN A FULL OR PARTIAL SHUTDOWN AND THIS HAD A MORE THAN NOMINAL EFFECT ON YOUR OPERATIONS (10%). 

• 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.

If you faced a Government Shutdown order AND this order resulted in your business being suspended (full or partial) then you may qualify.  However, this is a narrow and not what the tax scam companies are promoting.  The IRS has said the following 100% do not qualify:

• 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.

Supply Chain = nonqualifying 99% of the time, according to the IRS and tax experts:

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

• The government order caused the supplier to suspend operations (ie the Port being backed up does not work)
• 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.  This must have affected greater than 10% of your business

The Income Tax Component:

If you do qualify for ERC, you legally MUST amend both your business tax return AND personal tax return to pay tax on the reduced expenses.  Many of the scam companies do not tell you this but this is 100% required.  

If Anomaly qualifies and prepared your ERC, we will handle this piece.  If we do not, we have a professional responsibility, per the IRS, to review your claim and choose to amend or not to amend, based on our judgment.  Please remember, we are operating under a set of rules.

Unfortunately, given the haste in which this bipartisan law was passed, there was a lot of initial misunderstandings.  The companies that were set up specifically to claim this credit should raise red flags in your minds. 

Why would a company that was previously in marketing now be a tax company?  Why are they robo-dialing businesses based on public information and qualifying you in 5 minutes? 

At Anomaly, we have studied the law for over 2 years now and it has become a situation in which most qualified tax pros (CPA, tax lawyer, EA) are caught in a back-and-forth with non-credentialed scam artists.  A frustrating process to say the lease BUT our job is to keep our client's best interest in mind.  This is the oath we take. 

If you believe one of these scam companies has qualified you can amend and pay back the funds. Here are the procedures.

Congress has now extended the statute of limitations to audit these claims for additional time given the amount of fraudulent claims.