What is that big tax credit from Covid and how can my trucking company get it?
Ever since March 2020 when COVID was introduced to our daily life, there have been a lot of new laws to provide relief to businesses. The CARES Act (Coronavirus Aid, Relief, and Economic Security) offered help with paying employees that couldn’t work due to quarantine or loss of child care. It also had the PPP loans (paycheck protection program) that kept many businesses afloat during the shutdown. Later, there was a second round of PPP loans for some also.
There is also a large tax credit for businesses that were affected by COVID called the Employee Retention Credit or ERC. ERC will pay 50% of wage and benefits up to $5000 per quarter for each employee you paid during a qualifying quarter. The question is does your trucking company qualify?
There were two ways to qualify for ERC for a quarter. The first involves a business that had to suspend operations. Trucking was by and large considered to be essential so this one generally does not apply. The second way to qualify is if your trucking company had a decline in gross receipts of 50% or more when comparing 2020 to 2019 for the same quarter. There is a 2021 to 2019 comparison but it really doesn’t apply to trucking as rates have been robust when compared to 2019. So let’s focus on the 2020 opportunity.
For most trucking companies, the best chance at getting this credit is for the quarter from April 2020 through June 2020. If your shippers were closed, you may have a 50% decline in revenue. We have some clients that haul for the auto industry and it came to a standstill in that quarter. There were other industries that were similarly affected. If that sounds like your trucking company check the math on revenue and see if it dropped by 50% when compared to 2019 for April to June. If it does, you qualify for the credit.
To get the credit you’ll need to determine wages and benefits costs for that quarter. Your payroll company should be able to provide the wage information to you for free. Add the benefit costs and your credit is 50% of the first $10,000 for the quarter. Easy math example, if you have twelve employees that all made $10,00 in wage and benefits in the qualifying quarter, that’s a $60,000.00 credit for you. YAY! You get the money by amending your 941 for that quarter. It will take a while for the IRS to process it, I am hearing six months or more, but it will be a happy day when you get that check.
Do you have questions about the ERC or other COVID relief for trucking companies? Please comment below or use the contact us page to ask us! We are happy to help!
Written by Mike Ritzema
With over 20 years of experience in entrepreneurship, management, business planning, financial analysis, software engineering, operations, and decision analysis, Mike has the breadth and depth of experience needed to quickly understand entrepreneurs’ businesses and craft the most suitable solutions.
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