HOUSTON, TX / ACCESSWIRE / July 13, 2023 / The Employee Retention Tax Credit (ERTC) deadline has been in the minds of many business owners wondering when it will expire. There is still time for businesses that grappled with significant revenue losses or mandated shutdowns due to the COVID-19 pandemic, to claim some financial relief to make up for those past years losses and challenges. The ERC tax credit, a refundable payroll credit, is a lifeline for companies navigating the past challenging economic landscape the pandemic brought. The good news is that qualified employers can retroactively file for the past 2020 and 2021 tax years until April 15th, 2024 and April 15th, 2025 respectively.
"Understanding the Employee Retention Tax Credit is a complex endeavor. Business operators must diligently familiarize themselves with the eligibility guidelines and the ERC filing process. The financial relief at stake for eligible companies is substantial, but its availability rests upon the accurate and timely submission of ERC filings through IRS Form 941-X, of which ERC expert help should be sought," said Marty Stewart, Chief Strategy Officer (CSO) with Disaster Loan Advisors (DLA). DLA has assisted over 700+ companies with their ERC / ERTC Tax Credit claims.
Quick Facts: Key Takeaways for the Employee Retention Tax Credit Deadlines in 2023, 2024, 2025
- Businesses affected by the COVID-19 pandemic from the past 2020 and 2021 can still benefit from the Employee Retention Credit (ERC), a refundable payroll tax credit designed to provide financial relief.
- The ERC has strict eligibility criteria such as significant gross receipt declines or partial / full suspension due to government orders, and retroactive claims for eligible quarters in 2020 and 2021 can still be made until specific deadlines in 2024 and 2025.
- Claiming the ERC involves determining eligibility, and then filing IRS Form 941-X. It's essential to accurately calculate qualified wages, keep detailed records, and understand how the ERC interacts with other COVID-19 relief programs.
- Maintaining accurate record-keeping is crucial for claiming the ERC and demonstrating compliance with IRS regulations. Working with experienced tax credit specialists such as Disaster Loan Advisors can help navigate complexities and maximize potential benefits.
- The IRS advises to stay protected and that businesses should not pay a contingent fee for ERC filings.
What is the Employee Retention Credit (ERC)?
The Employee Retention Credit (ERC) is a tool introduced by the U.S. government to help businesses navigate the economic challenges brought on by the COVID-19 pandemic. It was part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020.
Primarily designed for employers facing significant revenue losses or those compelled to suspend operations due to governmental orders partially, it offers a tangible financial reprieve.
This credit is not structured as a loan, meaning you won't have any repayments hovering overhead. Instead, a refundable payroll tax credit underscores its intention, retaining employees during business turmoil.
While eligibility criteria exist, such as demonstrating substantial gross receipt declines compared to specific quarters in 2019, it allows businesses to lean on this funding lifeline.
Though ERC may have officially expired in September 2021, businesses are still within their rights to file retroactive claims up until specific deadlines in 2024 and 2025. The opportunities do not stop there. Corrections can also be made via filing IRS Form 941-X for eligible quarters so long as they adhere to designated deadlines.
With these provisions, ERC continues serving its purpose beyond its tenure, fortifying businesses against persistent uncertainties.
Eligibility Criteria for ERC Tax Credit Program
To be eligible for the Employee Retention Tax Credit (ERTC), businesses must experience a significant decline in gross receipts or be partially or fully suspended due to government orders.
Employers Experiencing Significant Revenue Decline
Significant revenue decline amid the COVID-19 pandemic has severely impacted numerous businesses, making it challenging to retain employees and continue operations. The Employee Retention Credit (ERC) is an essential lifeline for such employers.
As part of economic relief under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent Taxpayer Certainty and Disaster Tax Relief Act of 2020, this advantageous tax credit targets business that experienced at least a 50% reduction in quarterly gross receipts during 2020 compared to equivalent quarters in 2019.
Similarly, for 2021, eligible companies witnessed a minimum of a 20% drop in total revenues for specific quarters relative to the same period in 2019. Businesses grappling with drastic revenue declines stand to claim significant ERC credit benefits by filing IRS Form 941-X corrections on their original Form 941s within stipulated deadlines, giving them much-needed financial breathing space during these unprecedented times.
Businesses Partially Or Fully Suspended Due To Government Orders
Government orders amid the COVID-19 pandemic caused numerous businesses to cease or significantly scale back their operations. The Employee Retention Credit (ERC) provides crucial economic relief for these companies, aiming to alleviate some financial pressure caused by mandated shutdowns.
To qualify for this tax credit, your business must have been partially or fully suspended due to a government order relating to COVID-19 at any point in a calendar quarter. This includes local, state, and federal guidance, causing operational changes that impact commerce substantially.
Significantly, eligibility isn't based on total business closure. It could have been on capacity restrictions or other disruptions to your operations. Even those with partial suspensions can claim the ERTC tax credit and potentially receive significant refunds for taxes already paid.
How Does the Employee Retention Credit Work?
The Employee Retention Credit (ERC) is a valuable payroll tax credit that provides financial relief to businesses impacted by the COVID-19 pandemic.
It operates as a refundable tax credit, meaning eligible employers can receive funds even if they don't owe any payroll taxes. The ERC is calculated based on qualified employee wages during specific quarters in 2020 and 2021.
To be eligible for the credit, businesses must have experienced a significant decline in gross receipts compared to the same quarter in 2019 or face partial or total suspension due to government orders.
The maximum credit amount per employee varies depending on the year and whether the business qualifies as an "eligible employer." Claiming the ERC involves filing IRS Form 941-X to correct previously filed quarterly employment tax returns (Form 941).
Deadlines for ERC Filing in 2023, 2024, and 2025
The deadlines for claiming the Employee Retention Credit (ERC) in 2023 are crucial for businesses to be aware of. For eligible quarters in 2020, the deadline is April 15, 2024, while for eligible quarters in 2021, the deadline is April 15, 2025.
It's important to mark these dates on your calendar and take action accordingly. The ERC is a valuable tax credit that can help you retain employees during these challenging times. By understanding and meeting the deadlines, you can ensure that you take advantage of this opportunity to receive financial relief and support for your business.
How to Claim the Employee Retention Credit
To claim the Employee Retention Credit (ERC), eligible employers must report the tax credit on their federal employment tax returns, such as amended Form 941-X. It's important to accurately calculate and document the qualified wages and other relevant information required for claiming the credit.
Remember that retroactive claims for ERC can be made if you missed out on previous opportunities. To ensure a smooth and successful claim process, working with experienced tax specialists or tax advisors who are well-versed in ERC guidelines is recommended. They can guide you through the application process, help you understand eligibility requirements, and assist with proper documentation.
Remember to keep records of various aspects related to your eligibility for ERC, including the number of employees, the number of qualified wages paid during specific periods, a decline in gross receipts, and any government shutdown orders affecting your operations.
These records will support your claim in case of IRS audits or reviews. By carefully following these steps and seeking professional assistance, business owners can confidently navigate the process of claiming the Employee Retention Credit to maximize their financial relief during these challenging times.
Interaction of ERC with Other COVID-19 Relief Programs
The Employee Retention Credit (ERC) is a crucial component of the COVID-19 relief efforts for businesses, but it's important to understand how it interacts with other relief programs. The ERC can be claimed with programs like the Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDLs).
However, any wages used to claim the ERC cannot also be used for PPP loan forgiveness. This means that while you can take advantage of both programs, there are certain limitations and considerations to remember.
Additionally, businesses that receive Shuttered Venue Operators Grants or Restaurant Revitalization Fund grants cannot claim the ERC for wages paid using those funds. It's essential to carefully review each program's eligibility requirements and guidelines to ensure compliance and maximize your benefits.
Understanding how these multiple relief programs interact can help business owners decide which options will provide them with the most financial support during this challenging time. By navigating these complexities effectively, small business owners can leverage every available resource to sustain operations and retain valuable employees.
Record-Keeping Requirements for Claiming ERC
Businesses must maintain accurate and detailed records to claim the Employee Retention Credit (ERC). The IRS requires employers to provide documentation supporting their credit eligibility, including information on the number of employees, qualified wages paid, and evidence of a decline in gross receipts or government shutdown orders.
These records will be essential if the IRS audits a business's ERC claim. By keeping thorough records, businesses can demonstrate that they met all the criteria for claiming the ERC. This includes maintaining payroll records, financial statements, and other documents showing how qualified wages were calculated.
Additionally, it's important to keep track of any supporting documentation related to revenue declines or government-mandated closures. Accurate record-keeping ensures compliance with IRS regulations and helps protect businesses from potential penalties or fines associated with fraudulent claims.
By working with experienced tax specialists like Stenson Tamaddon at Bottom Line Concepts, business owners can ensure they meet all record-keeping requirements and maximize their chances of successfully claiming this valuable economic relief credit.
Common Mistakes to Avoid When Claiming ERC
Many business owners make common mistakes when claiming the Employee Retention Credit (ERC), which could result in delays or even rejection of their claims. Awareness of these pitfalls is crucial to ensure a smooth and successful ERC application process.
One common mistake is failing to meet the eligibility requirements. To claim the ERC, businesses must have experienced a significant decline in gross receipts compared to a specific quarter in 2019. Ensure you have accurate revenue records and can demonstrate this decline properly.
Another mistake is not accurately calculating qualified wages for eligible employees. The maximum credit amount per employee depends on their qualified wages, so it's essential to understand what qualifies as eligible wages and calculate them correctly.
Additionally, some businesses overlook record-keeping requirements. The IRS requires detailed documentation to support ERC claims, including payroll records and financial statements. Failing to maintain sufficient records could lead to challenges during an audit.
Lastly, many businesses forget retroactive claims for previous quarters in 2020 and 2021. Even though the ERC expired in September 2021, eligible employers can still file retroactively for those periods until April 15th, 2024, for 2020 and April 15th, 2025, for 2021 quarters.
To avoid these mistakes and maximize your chances of receiving the ERC successfully, consult with tax specialists or professionals who are familiar with the intricacies of this tax credit program. They can guide you through the application process while ensuring compliance with all necessary regulations.
Penalties for Fraudulent ERC Claims
Making fraudulent claims for the Employee Retention Credit (ERC) can have serious consequences for business owners. The penalties for such actions can include fines, imprisonment, or even both.
It's crucial to remember that the ERC is a refundable tax credit designed to provide economic relief to eligible employers during the COVID-19 pandemic. However, applying for this credit dishonestly undermines its purpose and violates federal laws and regulations.
To avoid these severe penalties, business owners must meet all eligibility requirements and accurately report their qualifications when claiming the ERC. Filing timely and accurate information with supporting documentation will help prevent unintentional errors or misconstrued claims that could lead to legal consequences.
About Disaster Loan Advisors™ Employee Retention Credit (ERC) Services
Disaster Loan Advisors™ (DLA) is a trusted team of financial tax professionals and Employee Retention Credit (ERC) consulting specialists dedicated to saving businesses from lost sales, lost customers and clients, lost revenue due to financial and economic harm caused by the COVID-19 / Coronavirus disaster, Delta and Omicron variants, and other recession and inflation downturns in the economy.
Having worked with over 1500+ business clients navigate the SBA Economic Injury Disaster Loan (EIDL), Paycheck Protection Program (PPP), and Restaurant Revitalization Fund (RRF) programs, DLA further refined its expertise in the ERC Tax Credit IRS program having assisted more than 700+ companies with their ERC Claims. Assisting ownership groups with multiple business entities, multiple location business owners, and other complex situations that require an expert tax and accounting strategist to be brought in to assess the situation and create the most strategic path forward.
DLA further specializes in another key pandemic-era SBA / IRS program where business owners are leaving a lot of relief fund money on the table. It is the often misunderstood and confusing Employee Retention Tax Credit (ERC) / Employee Retention Tax Credit (ERTC) program whereby company owners and partners can retroactively receive up to $26,000 to $33,000 back for each W-2 employee they had on payroll for the 2020 and 2021 tax filing years. Done correctly, these tax credits or cash refunds can be claimed retroactively for up to 3 years.
It's encouraged that business owners obtain professional assistance in going through the complex 941-X amended filing process to help your company maximize the full value of the ERC Credit Program, while staying safe and compliant within the complex IRS rules and regulations for claiming the ERC Credits.
DLA doesn't charge a percentage (%) of your ERC refund like many companies are charging. Instead, DLA works on a reasonable professional flat-fee basis. If you are looking for an ERC company that believes in providing professional ERC services and value for small business owners, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors is a good fit for you.
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SOURCE: Disaster Loan Advisors™ (DLA)