45. How Does An Employer That Acquires A Trade Or Business During The 2020 Calendar Year Determine If The Employer Had A Significant Decline In Gross Receipts?

Frequently asked question #45 “How does an employer that acquires a trade or business during the 2020 calendar year determine if the employer had a significant decline in gross receipts?” under the Determining When an Employer is Considered to have a Significant Decline in Gross Receipts section of FAQs: Employee Retention Credit under the CARES Act, provided by the IRS.gov to help business owners understand the ERC program. Information is below for the question #45 How does an employer that acquires a trade or business during the 2020 calendar year determine if the employer had a significant decline in gross receipts?

ERC Credit Frequently Asked Question #45:

Determining When an Employer is Considered to have a Significant Decline in Gross Receipts and Maximum Amount of an Eligible Employer’s Employee Retention Credit FAQs

45. How does an employer that acquires a trade or business during the 2020 calendar year determine if the employer had a significant decline in gross receipts?

For purposes of the Employee Retention Credit, to determine whether an employer has a significant decline in gross receipts, an employer that acquires (in an asset purchase, stock purchase, or any other form of acquisition) a trade or business during 2020 (an “acquired business”) is required to include the gross receipts from the acquired business in its gross receipts computation for each calendar quarter that it owns and operates the acquired business.

Solely for purposes of the Employee Retention Credit, when an employer compares its gross receipts for a 2020 calendar quarter when it owns an acquired business to its gross receipts for the same calendar quarter in 2019, the employer may, to the extent the information is available, include the gross receipts of the acquired business in its gross receipts for the 2019 calendar quarter. 

Under this safe harbor approach, the employer may include these gross receipts regardless of the fact that the employer did not own the acquired business during that 2019 calendar quarter.

An employer that acquires a trade or business in the middle of a calendar quarter in 2020 and that chooses to use this safe harbor approach must estimate the gross receipts it would have had from that acquired business for the entire quarter based on the gross receipts for the portion of the quarter that it owned and operated the acquired business.

However, an employer that chooses not to use this safe harbor approach is only required to include the gross receipts from the acquired business for the portion of the quarter that it owned and operated the acquired business.

Example: Employer L acquired all of the assets of a trade or business in a taxable transaction on January 1, 2020. The gross receipts of the acquired business were $50,000 for the quarter beginning January 1, 2020 and ending March 31, 2020 and $200,000 for the quarter beginning January 1, 2019 and ending March 31, 2019.

Employer L has access to the books and records from the prior owner of the acquired trade or business and can determine the amount of gross receipts attributable to the trade or business for the quarter beginning January 1, 2019 and ending March 31, 2019.

For purposes of the Employee Retention Credit, Employer L must include $50,000 in its gross receipts computation for the quarter beginning January 1, 2020 and ending March 31, 2020 (Employer L actually owned the trade or business) and may include $200,000 in its gross receipts computation for the quarter beginning January 1, 2019 and ending March 31, 2019.

For more Internal Revenue Service (IRS) Department of the Treasury Employee Retention Credit (ERC) Determining When an Employer is Considered to have a Significant Decline in Gross Receipts FAQs, visit the official IRS.gov tax website.

Conclusion and Summary on ERC Credit FAQ #45. How does an employer that acquires a trade or business during the 2020 calendar year determine if the employer had a significant decline in gross receipts?

The “How does an employer that acquires a trade or business during the 2020 calendar year determine if the employer had a significant decline in gross receipts?” is Frequently Asked Question #45 of many commonly asked questions small business owners are wondering about how to file the Employee Retention Tax Credit (ERTC). The IRS ERC Tax Credit program is a confusing and complex process to determine the correct ERC calculations your business qualifies for. Answers to “How does an employer that acquires a trade or business during the 2020 calendar year determine if the employer had a significant decline in gross receipts?” and filling out form 941-X may change slightly from frequently updated rules and regulations from the IRS. Leave a comment below if you have further questions on ERC Credit FAQ #45.

Help Completing / Filing / Claiming the Employee Retention Credit (ERC)

Receive Up to a $26,000 ERC Credit from the IRS Per Employee

Disaster Loan Advisors can assist your business with the complex and confusing Employee Retention Credit (ERC), Form 941-X, and the Employee Retention Tax Credit (ERTC) program. 

Depending on eligibility, business owners and companies can receive up to $26,000 per employee based on the number of W2 employees you had on the payroll in 2020 and 2021.

The ERC / ERTC Tax Credit Program is a valuable IRS tax credit you can claim. This is money you have already paid to the IRS in payroll taxes for your W2 employees.

We DO NOT charge a percentage (%) of your ERC Refund like some companies are charging. Some ERC firms out there are charging upwards of 15% to 35% of your ERC refund!

Our professional ERC fee and pricing structure is very reasonable in comparison.

If you are looking for an ERC Company that believes in providing professional ERC Services and value, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors is a good fit for you. Schedule Your Free Employee Retention Credit Consultation to see what amount of employee retention tax credit your company qualifies for.

Cover Image Credit: Irs.gov / ERC FAQ / Disaster Loan Advisors.

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