ERC – Tax credit up to $26,000 per employee
Learn more about ERC. It provisions up to $26,000 for businesses that kept their employees on payroll during the COVID-19 pandemic.
Overview
The Employee Retention Credit (ERC) is a tax credit designed to encourage businesses to keep employees on their payroll during the COVID-19 pandemic. It was introduced as part of the CARES (Coronavirus Aid, Relief, and Economic Security) Act in March 2020, and extended and expanded by subsequent legislation.
The credit is available to eligible employers who experienced a significant decline in gross receipts or were partially or fully suspended due to a COVID-19-related government order, and who continue to pay employee wages during the pandemic. The credit is calculated as a percentage of qualifying wages paid to employees and can be claimed on an employer’s quarterly payroll tax return.
What is ERC?
With an intention to encourage employers to retain employees, financial incentives were provisioned in the CARES act. Many small to medium-sized businesses, entrepreneurs, and startups were affected negatively by the pandemic.
This economic suffering throughout the country had a deep impact and CARES aims to bring businesses back on their feet. The ERC is a tool that provides financial incentives on a per-employee basis to businesses that kept their workforce on payroll during the COVID-19 pandemic, more specifically, throughout 2020 and for the first 3 quarters of 2021. This tax refund is processed through the IRS.
Any eligible business can claim a refund of up to $5,000 per employee for 2020 and up to $7,000 per employee for each quarter of 2021 from Q1 to Q3. That’s a combined maximum of $26,000 per employee.
- Checks from US Treasury: The refunds are received as a check from the US Treasury and can be used for any business purpose.
- Multiple amendments: Throughout 2020, ERC was hardly used by companies. It’s undergone many expansions and amendments and is being used by companies from all domains.
- Incentivizing businesses: The program is designed to reward businesses that kept the US economy afloat during trying times.
- CARES Act: The CARES relief bill, the one that created PPP loans, has also created the ERC program.
With most businesses not claiming ERC, it’s one of the most underutilized financial incentives in the US today
- As per Forbes Magazine, the IRS anticipates that around 70-80% of businesses are eligible for the ERC.
- IRS Revenue Officer Paul Dolnier said, “It’s surprising to me how unaware businesses are that these credits and refunds exist.”
- The IRS website urges employers to take advantage of the newly-extended employee retention credit.
Eligibility
Checking eligibility
The first step is knowing if your business qualifies for the ERC. The majority of small and medium businesses qualify for ERC. At the same time, it’s not rare for companies to unknowingly disqualify themselves by providing outdated information, sometimes from their own CPA.
ERC is directly tied to your payroll and not your income tax returns. With most CPAs handling business income tax returns, many businesses are unable to fully capitalize on this new incentive.
Furthermore, the fact that the ERC qualifications and limitations have been amended various times by Congress since its initial rollout doesn’t help either. There are over 200 pages of rules and regulations in the ERC tax code and demystifying it isn’t the priority of any firm’s CPA, quite naturally.
Talking to an ERC specialist can help you provide updated information to get the full refund amounts that your business qualifies for.
Eligibility requirements
- ERC benefits will begin to expire starting 2023
- The government gives ERC refunds to small businesses that are employers operating a trade, business, or tax-exempt organization. Some governmental employers were also included in an expansion of the program in 2021.
- A small business has fewer than 100 full-time employees (calculated from 2019) for the 2020 ERC refund and fewer than 500 full-time employees (calculated from 2019) for the 2021 Q1 to Q3 ERC refund.
- Your small business will qualify for an ERC refund if it meets either of the following criteria:
- The business experienced a notable decline in gross receipts during the 2021 calendar quarter, equating to a 20%+ decline vs. the same quarter of 2019 and a 50%+ decline in the 2020 calendar year.
- The business experienced limitations in commerce, travel, or meetings due to COVID-19-related government orders. Such a business can qualify for an ERC refund if the government orders impacted it in one of the following ways:
- Business operations were interrupted.
- The supply chain experienced interruptions.
- There was an inability to access equipment.
- Businesses had a limited operating capacity.
- Working with vendors was rendered uneconomical.
- The hours of operation were reduced.
- Services or products being offered to customers were limited in any way or reduced.
Don’t be left behind! We highly recommend you look into ERC with a fresh review even if your tax advisor has already looked into it.
Refunds
How much am I looking at?
Though you can calculate the total amount by calculating the full-time employees from 2020 and 2021 Q1 through Q3, the exact process is a little more complex than that and depends on a variety of factors apart from the payroll.
You need a specialized review service to fully understand the refund that your business is eligible for.
Check the refund amount for your business for free
Your final refund amount is determined by many factors including:
- Qualifying quarters
- Number of employees
- PPP loans
- Group health premiums
- Hours worked
- Participation in other government programs
- Wages paid
Filing
File now before it’s too late!
The maximum cap has started to reduce starting in 2023 and it will keep getting smaller every quarter. Don’t miss your chance! More and more small businesses are learning about ERC refunds and therefore, it can reduce processing speed in the near future. We recommend you start today.
Work with professionals for the best results
If you want to avoid a rejected claim or a reduced refund, we highly recommend going with ERC specialists. Other providers might not have the lowdown on the latest amendments or the experience to navigate the hurdles to get the maximum ERC refund. In some cases, filing without an ERC specialist also runs the risk of prolonging the process, further revisions, or filing more than once to get a proper response.
Tax providers that aren’t well-versed in filing ERC claims might not be able to maximize the available ERC that your business is eligible for. Not to mention that some mistakes could end up costing you a significant portion of, if not all, the ERC tax refund.
Professional Help
Unlock the funds your business deserves with our streamlined ERC process. Our team of experienced tax attorneys and CPAs has overseen thousands of claims and recovered over $1 billion in ERC refunds for our clients. With our end-to-end process, we simplify the complex process of seeking an ERC so you can focus on running your business. From eligibility to receiving the ERC tax funds, we’re here to support you every step of the way.
Say goodbye to the frustration and confusion of navigating ERC on your own. With our customer-first approach and problem-solving capabilities, we make it easier than ever for your business to get maximum ERC refunds. Don’t miss out on the money your business is entitled to – get started with our ERC process today.
- Maximize your ERC credit: Our experts will help you maximize your potential refunds by identifying every credit available to you, so you get the most out of your ERC claim.
- ERC Specialists one tap away: Our team of experienced tax attorneys and CPAs are available to answer your questions and guide you through the entire ERC process.
- Streamlined process: Our streamlined process makes it easy to file your ERC claim quickly and efficiently, so you can focus on running your business.
- No extra charges: Our pricing is transparent and straightforward, with no hidden fees or surprise charges. You’ll know exactly what to expect when you work with us.
Why do you need professional help?
At first glance, the process of claiming Employee Retention Credits (ERC) might seem straightforward. However, it can quickly become complex, with changing regulations and eligibility criteria, and other nuances that can impact the amount of your credit.
This is where professional help comes in. By working with experienced tax attorneys and CPAs, you can be sure that you’re not leaving any money on the table. They can help you navigate the maze of ERC requirements, optimize your credit eligibility, and make sure that you’re receiving the maximum refund you’re entitled to.
Don’t take any chances with your ERC claim. Trust the experts to get it right the first time. With our team of skilled professionals, you can relax and focus on running your business while we handle the ERC filing process for you.
