What Is the Employee Retention Credit (ERC)?
It is a government tax credit available to employers who experienced financial hardship due to COVID-19. The ERC is a refundable tax credit equal to 50% of the qualified wages paid by an eligible employer. To be eligible, an employer must have experienced a decrease in revenue or disruption in business due to COVID 19 (which almost every experienced). The credit is available for wages paid from March 13, 2020 through December 31, 2020. For the 2021 program, the credit is increased to 70%, and the limit is $10,000 per quarter. This means the annual maximum for an employee is $26,000.
Who Is Eligible for Employee Retention Credit?
The ERC is available to any employer—including non-profits, regardless of size—that has experienced either a full or partial shutdown of operations due to a governmental order related to COVID-19, or has experienced a decline in gross receipts.
Can I Still Apply for ERC in 2023?
The employee retention tax credit (ERTC) is available to qualifying employers for the last three quarters of 2020 and the first three quarters of 2021. The employer’s tax return for the second quarter of 2020 was due July 31, 2020. This means that we can amend these returns and request a refund until July 31, 2023.
The payroll tax return for the third quarter of 2021 was due on October 31, 2021. That means that we have until October 31, 2024, to amend this return and request a refund.
There is still time to claim the ERTC tax credit in 2023, but you have to act fast if you want to beat the deadline and get yours before the funds dry up. This tax credit can be complicated, so don’t wait to apply. Click here to calculate your estimated refund
and expedite getting your money as soon as possible.
How Is ERC Different From PPP?
The Paycheck Prevention Program was a forgivable loan from the government that you had to apply for and were granted based on your credit history and borrower status. The Employee Retention Credit (ERC) returns the payroll taxes that you have already paid and thus it is yours to claim, regardless of your borrower or credit worthiness. Once you receive the funds you do not have to pay them back or take any more action.
Why Is This The First Time I'm Hearing About The ERC?
First of all when the Paycheck Protection Program was announced it was in a different time in the world where all eyes were on the Small Business Association. That program was a first of its kind and thus made a lot more noise (and was marketed much heavier) than the Employee Retention Credit.
In our opinion the Employee Retention Credit is even better as you don't have to pay any of it back and you can get it even if you already got the Paycheck Protection Program.
Most CPAs and bookkeepers don't even know this exists which is why it's important to file with us so that we can expedite the process and get you back as much as possible.
Why Can't My CPA/Bookkeeper Do This For Me?
In our experience less than 5% of CPAs/Bookkeepers even know that this credit exists and those that do most likely are using outdated information (for example previously you could not get this credit if you got PPP, but that changed recently and many CPAs/Bookkeepers aren't claiming it for their clients).
There are over 70,000 pages of tax code which means it would be impossible to be an expert on all of it. We're specialists in this field and us and our partners have gotten back almost $3B for small businesses around the United States. Your CPA/Bookkeeper is more of a generalist and will likely just fill out the form without thinking much of it potentially leaving you with hundreds of thousands of dollars you could have gotten back if you did it the right way.
We have a full team of specialists who can work with your CPA/Bookkeeper to get the necessary information required and make it as smooth a process as possible for you.
How to You Qualify for ERC in 2022?
There is still time to apply for the ERTC tax credit in 2022. The credit is no longer available for current claims, but you can claim it retroactively by amending your employment tax returns. The IRS lets you amend returns and claim refunds for up to three years after the filing deadline. That means the deadline for claiming the ERTC is three years after the original due date for the tax return. It's important to note however that the IRS is likely to end the program when they run out of funds so having us start this process immediately is imperative to securing your refund before it's too late.
Is the ERC Credit Taxable?
The answer is no, but it does impact your income tax return. The benefits of receiving the credit far outweigh its effect on your taxes.
How Much Does It Cost?
The initial analysis to determine your eligibility and approximate credit is completely free. If you file for an ERC with us, our fee is a small percentage of the credit once it has been received.
How Will I "Use" a Tax Credit?
This program is not an “income tax credit” and not related to your annual business tax returns or your profit/loss from the business. Although it is called a tax credit, it is most frequently received as a cash payment (typically in the form of a check) from the IRS. You may also use it to offset future payroll tax payments.
What If I Own Multiple Businesses?
Perhaps the most complicated aspect of the ERC program, separate businesses under common ownership that meet IRS Controlled Group criteria must be evaluated together for eligibility. If the tests are passed, all entities are eligible; if not, none are eligible. The ERC is then calculated and filed for each separately. If you apply through us we can easily walk you through this entire process and make sure you're filing forms in a way that is most beneficial to you.
How Long Will It Take To Get My Refund?
Once we receive your application and documents our work will be complete within 48 business hours (other companies take 15-45 days). You’ll receive refund checks from the US Treasury in 5 - 8 months depending upon backlog. The longer you wait, the longer it will take!
Is ERC and ERTC the Same Thing?
Yes, ERC stands for ‘Employee Retention Credit’, also known as the ERTC ‘Employee Retention Tax Credit.’ This program was created by the Coronavirus Aid and Relief Act in 2020 to help businesses keep employees on their payroll. Both Employee Retention Tax Credits (ERTC) and Employee Retention Credits are refundable tax credits.