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What is the Definition of a Trade Or Business for the Employee Retention Credit | Rental Business and ERC

What is the Definition of a Trade Or Business for the Employee Retention Credit  |  Rental Business and ERC

 

ERC IRS Notice 2021-20 Question #1:

A. Eligible Employers

 

What is a “trade or business” for purposes of the employee retention credit?

 

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 IRC 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.

 

This is particularly important for landlords.

 

The first few tips are in relation to using the safe harbor, and the rest will make the entire process a little less stressful.

1.  You should maintain separate books and records for every rental property.  This means that every house, duplex, or apartment should have its own records associated with the property.

2.  As you read above, for a rental property to be considered a business, you must be actively working or maintaining the property.  Active from a rental perspective means at least 250 logged hours of maintenance or rental services each year that you or an independent contractor performed.

3.  It’s imperative that you maintain time reports or any documents that show the number of hours you’ve serviced the property, a description of all the services you’ve done, the date and time on which the services were completed and who, if not yourself, completed the services.

4.  Our sixth tip is to get help.  While you may be required to put in a specific amount of hours at the property to be considered a business, you can hire people, such as property managers and maintenance employees, to help make the job easier.  If these people work for you, you can still claim the property as a business.

 

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