Qualifications for the ERC Program

Wonder if you qualify for the Employee Retention Tax Credit? Below are direct hypotheticals from IRS Form 2021-20. This question and answer format was recently amended to the CARES ACT to help business owners better navigate the complex waters of this relief program. 

For purposes of the employee retention credit, “trade or business” has the same meaning as when used in section 162 of the Code other than the trade or business of performing services as an employee. Under section 162, an activity does not qualify as a trade or business unless its primary purpose is to make a profit and it is carried on with regularity and continuity. The facts and circumstances of each case 18 determine whether an activity is a trade or business. A taxpayer does not necessarily need to make a profit in any particular year in order to be in a trade or business as long as a good faith profit motive is present. For purposes of the employee retention credit, a tax-exempt organization described in section 501(c) of the Code that is exempt from tax under section 501(a) of the Code is deemed to be engaged in a “trade or business” with respect to all operations of the organization.