Good morning or afternoon, wherever you are located. Welcome to our weekly discussion about the Employee Retention Tax Credit that is still alive and well with the U.S. Treasury. These are taking a little bit of time to get, but we've been seeing some pretty good size checks coming through for employers that qualify. And let’s just jump right into this week's questions that we've been hearing from prospective clients and clients. The first one is what is the Employee Retention Tax Credit? This is a program that started back at the beginning of the pandemic, about the same time as the Paycheck Protection Program was kicking off. And at its inception, there was a lot of miscommunication I guess, or misunderstanding about what this thing really was. It was not super clear whether you could take PPP and take the Employee Retention Tax Credit.
In fact, when it started, you could only opt for one or the other; that has changed. And so that's thrown some people off in this process, but quite simply what it is now is a fully refundable credit that an employer with employees. And that's a very important distinction. You must have employees in order to take the Employee Retention Tax Credit, but employers that have kept their employees paid in 2020 and 2021, despite first of all, any government shutdowns of the business by governmental order, either full or partial shutdowns or businesses that have suffered some type of a reduction in their gross receipts for 2020. You compare it to a quarter of 2019 that you're looking at and for 2021, you also compare it to that same quarter in 2019. It is a little different for each year. For 2020, you have to have a 50% reduction in that quarter that you're comparing to 2019. And for 2021, it gets a little easier. You only have to show a 20% reduction. These are for employers again that have employees not independent contractors.
This was a source of confusion because the PPP, ultimately, if you'll recall, started letting employers, self-employed into that mix. Folks that had some independent contractors, into that mix, not so with the ERC. You must have employees 500 or less. So, if that's you that’s, those are some things that could get you into the Employee Retention Tax Credit category. There is a third category that will also let more and more employers in. And we could talk about that a little more in a minute, but that includes employers who had some type of a supply chain disruption, and that's kind of a cushy, squishy term. But in essence, if you had a supply chain reduction, in some part of your business that constitutes 10% or more of your business, any type of reduction there, there's not a 50%, not a not a 20% reduction. It's just if 10% of your business was somehow affected by supply chain issues.
The next question, can I do this myself? The question that we hear from a lot of people that are in the midst of or have been trying to do this for several months now and facing a lot of confusion. It's taking a lot of time, more than likely. I think it, on average, it takes at least eight hours for an employer to bring themselves up to speed on this. And then there's still questions. You know that a lot of people have the thing I always say we do mostly tax resolution work here at my resolution company. But we are doing these ERC credits, but I often say, you know, you could do these things yourself. The real question you should ask is, should you be doing them yourself? Because there is a massive difference.
And in a nutshell, it all comes down to how much time and how much risk you want to take. Mostly, it comes down to, if you make a mistake in this process, how far will that set you back? These are already taking up to a year in order to get the actual refund. So you don't want any setbacks. You don't want to have your documentation returned to you and have to start over from the beginning.
The next question we get didn't the program technically expire already? And that's a great question. The program did technically expire in the third quarter of 2021, for most employers. If you are a startup business and you can show that you had employees and that you had one of those three qualifications that I just spoke of, then you can actually get it into fourth quarter of 2021. But there’s some confusion here because the IRS website says that the application form for this thing, and that's the one that we had been using up until the end of 2021, has now been retired. It's done. And that's true. There is no more form to technically take the ERC. However, the process for this remains virtually the same as it always was, which is, you come up with your calculations and then you file an amended 941 quarterly report of payroll. It's called the 941X. And those are still alive and well. They technically go until you can amend them up until three years past the original deadline of that 941.
So the program is technically still alive and well, there is still money to be had. There was $400 billion out there for this program and so it's alive and well, it's still going. You need to take a look at this thing and see if your company qualifies. Next question. Do I have to pay back the taxes in any way? No, this is a no strings attached type of program. Unlike the Paycheck Protection Program, which required you to use your money that you received from that program, from the PPP, you had to use it on payroll, rent utilities, and some other things that they allowed you to spend your money on. Not so with the ERC, you can use these funds for anything. It is really a reward for keeping your employees paid during the pandemic and beyond. While things were technically shut down, employers were essentially the unemployment office for their employees and beyond the technical, immediate effects of the pandemic, those being governmental shutdowns, there would be things like reductions in gross payroll, as well as these supply chain reductions that could have hurt businesses as well. Nonetheless, the employers did the right thing and kept their employees going. And so you'll be rewarded for that, with some no strings attached money.
Next one, what if I have already been told that I don't qualify for the ERC? That's not uncommon. Most of the employers that we're helping out right now have had a CPA or some internal accounting person, HR, maybe tell the owners that, sorry, this ship has sailed. Or like we talked about at the beginning, they were under the misimpression that you could only take PPP and not ERC. Those things have changed. You could take both, you will offset any PPP monies that you received for payroll only, not for the rent utilities, other non-payroll things, those are off the table, but you would have to offset PPP money that you receive for payroll for those quarters, from this calculation. However, you know, PPP was only really technically for eight weeks of payroll and there are more than eight weeks in a quarter. So even if you received it and had to spend your PPP for a certain quarter, it's worth taking a look at these calculations again, even if you receive PPP.
Last question that we're seeing, can I check the status of my ERC refund? And, yes, there is a place, you just call the IRS's main line. There is a prompt there for checking that status with the IRS. So I think probably the best advice that I can give on that is that if it's not being returned to you, you can asses that it's still in the works.
These things still have a long time before they run out. You just have to be patient with them. They will send you back anything if there's a question, or you didn't submit something properly. Keep those questions coming. These are very important things to make sure that people are taking advantage of the Employee Retention Tax Credit, because again, it is still going, there is money, and you better get on it. It may run out at some point like all these governmental programs so get on it, give us a call.