How Full and Partial Suspensions Affect Your ERTC Eligibility

The Employee Retention Tax Credit (ERTC) is one of the most valuable financial relief programs available to businesses impacted by the COVID-19 pandemic. While many businesses know they can qualify based on gross revenue declines, fewer understand how full and partial suspensions of operations can also make them eligible.

The IRS has issued guidance clarifying how government-mandated shutdowns and restrictions affect ERTC eligibility. Even if your revenue didn’t decline significantly, you may still qualify if your business faced operational restrictions due to government orders.

This guide explains how full and partial suspensions work, how they impact ERTC eligibility, and what your business needs to do to claim the credit.

1. Understanding Full and Partial Suspensions Under ERTC

✅ What is a Full Suspension?

A full suspension occurs when a government mandate forced a business to completely shut down its operations for a period of time.

💡 Examples of Full Suspension:

• A restaurant that was forced to close indoor dining due to a city-wide shutdown.

• A retail store that was required to shut down all in-person operations for multiple months.

• A gym that had to cease all operations due to a local executive order.

If your business was completely unable to operate, you likely qualify for the ERTC for the entire period of government-ordered closure.

✅ What is a Partial Suspension?

A partial suspension occurs when a government order significantly limited a business’s operations, even if it wasn’t fully shut down.

💡 Examples of Partial Suspension:

• A manufacturer that had to reduce production capacity due to social distancing rules.

• A hair salon that could only operate at 25% capacity under local health guidelines.

• A hospital or clinic that suspended elective procedures due to state-mandated restrictions.

• A construction company that faced delays due to restrictions on permits or inspections.

Even if your business was allowed to stay open, operating under significant restrictions could qualify as a partial suspension.

2. Key IRS Guidelines for Full & Partial Suspensions

The IRS issued guidance on how businesses should determine if a full or partial suspension qualifies them for the ERTC.

IRS Criteria for Partial Suspensions:

✅ The restriction must be government-mandated (not voluntary).
✅ The restriction must have a more than nominal impact on business operations.
✅ The business must have been able to operate normally before the mandate.

💡 Key Rule:
A nominal impact is defined as a 10% or greater reduction in business operations due to government restrictions.

3. How Full & Partial Suspensions Affect ERTC Eligibility

The length of time a business qualifies for the ERTC depends on the duration of the government-mandated restriction.

For Full Suspensions:

✔ Businesses qualify for the entire duration of the shutdown.
✔ If operations resumed once restrictions were lifted, eligibility ends when full operations resumed.

For Partial Suspensions:

✔ Businesses qualify for each quarter the restriction was in place.
✔ If restrictions changed from quarter to quarter, eligibility may also change.
✔ Even if the business made up lost revenue through other means (such as online sales), it may still qualify based on the partial suspension.

💡 Example: A restaurant forced to close indoor dining for 6 months in 2021 but offered takeout and delivery may still qualify for ERTC for those 6 months.

4. Common ERTC Myths About Full & Partial Suspensions

🚨 Myth 1: “My business stayed open, so I don’t qualify for ERTC.”
✅ Reality: Even if your business operated, government restrictions (such as reduced capacity or limited services) may still qualify you.

🚨 Myth 2: “I don’t qualify because my revenue didn’t drop.”
✅ Reality: Revenue decline is only one of two ways to qualify for ERTC. Businesses affected by suspensions or restrictions still qualify.

🚨 Myth 3: “I adapted my business (e.g., online sales) so I’m not eligible.”
✅ Reality: If you had government-mandated restrictions that impacted in-person operations, you may still qualify, even if you found alternative revenue sources.

5. Steps to Claim the ERTC Based on Full or Partial Suspensions

Step 1: Identify Government Restrictions That Affected Your Business

✔ Look for city, state, or federal mandates that forced shutdowns or limited your operations.
✔ Gather official government orders, executive mandates, or health department guidelines for documentation.

Step 2: Assess the Impact on Business Operations

✔ Determine how restrictions affected your ability to generate revenue or operate normally.
✔ Did the restrictions result in a 10% or more decline in business activity? If yes, you likely qualify.

Step 3: Gather Payroll & Tax Documentation

✔ Collect payroll records from 2020 and 2021.
✔ Identify wages paid to employees during suspension periods.
✔ If you received a PPP loan, separate wages used for PPP forgiveness from ERTC-eligible wages.

Step 4: File Form 941-X to Claim Retroactive ERTC Refunds

✔ ERTC is claimed by amending your quarterly payroll tax filings using IRS Form 941-X.
✔ If you didn’t originally apply, you can still claim the credit retroactively for 2020 and 2021.

💡 ERTC Deadlines:
📅 April 15, 2024 – Last chance to claim for 2020 wages
📅 April 15, 2025 – Last chance to claim for 2021 wages

6. Why It’s Important to Act Now

🚨 ERTC Claims Take Time to Process
The IRS is backlogged with ERTC claims, and businesses may wait 4-8 months for refunds. Filing sooner ensures faster access to your funds.

🚨 The IRS is Cracking Down on Fraudulent Claims
With the rise of ERTC scams and fraudulent filings, the IRS is reviewing claims more closely. Businesses should work with reputable professionals to ensure accuracy.

🚨 Funds Can Be Used for Any Business Purpose
ERTC refunds provide flexible cash flow—businesses can use the funds for payroll, rent, inventory, expansion, or debt repayment.

Maximize Your ERTC Eligibility

Many businesses assume they don’t qualify for ERTC because they didn’t have a major revenue drop. However, full and partial suspensions due to government restrictions can also make a business eligible.

By understanding how full and partial suspensions impact ERTC, businesses can claim thousands (or even millions) in tax refunds they may have missed out on.

💡 Key Takeaways:
✔ Full shutdowns automatically qualify businesses for the credit.
✔ Partial suspensions may qualify if restrictions caused a 10% or greater impact on operations.
✔ Even if revenue didn’t drop significantly, restrictions like reduced capacity, supply chain delays, or industry limitations may make you eligible.
✔ ERTC claims are still open until 2024 & 2025—apply before deadlines!

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