Table of Contents:
Table of Contents:
The Employee Retention Credit (ERC) — also known as the Employee Retention Tax Credit (ERTC) — was created to help small and medium-sized businesses like yours overcome COVID-19 hardships in the form of payroll tax refunds. How does your business receive the refund?
With multiple changes and amendments to the legislation surrounding the ERC, the application process is complicated. Even if your business qualifies, your application could be denied if there are errors or missing information.
It's time to get your ducks in a row so you can get the money your business deserves. Here are four tips to make sure your ERC application is approved the first time around.
1. Prequalify for the Employee Retention Tax Credit
Before you start your payroll tax refund journey, check your business' eligibility. The qualifications for the 2020 ERC and the 2021 ERC are slightly different, so before you get started, first check both sets of guidelines to see if your business may be eligible to qualify.
2020 ERC Qualifications
- You had a maximum of 100 employees on your payroll in 2019.
- You kept employees on your payroll.
- Your business suffered during the pandemic:
- Your business was forced to shut down due to a government order for any quarter of 2020.
- Your revenue decreased by 50% or more for any 2020 quarter when compared to the same quarter of 2019.
2021 ERC Qualifications
- You had between 5 and 500 employees on your payroll in 2019.
- You kept employees on your payroll.
- Your business suffered during the pandemic:
- Your business was forced to shut down due to a government order for any quarter of 2021.
- Your revenue decreased by 20% or more for any 2021 quarter when compared to the same quarter of 2019.
For both years, your business may also qualify if it had canceled travel plans, meetings were impacted, or your suppliers had issues in their supply chain.
You could earn a refund of up to $5,000 per employee for 2020 and up to $7,000 per employee per quarter for the first three quarters of 2021 that you kept on your payroll.
2. Ensure all paperwork for your ERC refund is prepared
Besides your payroll and business revenue information, you'll need to fill out forms with accuracy to ensure a smooth process. Form 7200 was used to claim the refund in advance, but it is no longer in use. Check with a tax professional to understand what is required for the process.
According to the IRS, common errors when filing includes:
- Missing or inaccurate Employer Identification Number (EIN).
- Checking more than one box for various sections.
- Incomplete sections.
- Incorrect monetary calculations.
- Unsigned forms.
Because of the complexity of the legislation, your CPA may have challenges or questions about the ERC when preparing the paperwork, especially if they are not specifically experienced with the employee retention tax credit process.
3. Work with an ERC Company
An ERC company is a network of tax attorneys, CPAs, and tax professionals who understand the complicated nuances of the Employee Retention Credit program. This is key to checking your business' eligibility and processing the correct forms the first time you apply — without issues. Although you could use a traditional CPA, they may not be well-versed with the ERC, especially since it has undergone many changes and updates.
An ERC company will:
- Check if your business is eligible for one or both ERC years.
- Estimate your business' refund, so you know how much money to expect back.
- Process your refund application, so you get your money.
4.Have Your ERC Application Submitted ASAP
You'll want to apply now since the period to apply is set to end, just like it did with the Payroll Protection Program (PPP). Additionally, other situations could occur that could negatively impact your chance of claiming the ERC.
For example, the government could decide to end the program even earlier than planned — in fact, they already did this once with the Infrastructure Bill. Most small businesses can now only qualify for the first three quarters of 2021 instead of all four quarters as originally stated.
With potentially hundreds of thousands of dollars on the line, it's crucial to get your business' ERC application completed and submitted now.
Check Your Eligibility
Spend a little time to see if you can get cash back into your wallet like many other businesses. It’s easy to get started and see if you qualify for ERC assistance. You'll get a free estimate of your potential refund, and there is no money due upfront.
Even if you don't think your business qualifies — or even if your CPA advised that you won't — you should give it a shot because tens of thousands of businesses qualify for the payroll tax credit.
Your ERC application doesn't have to be a headache. Innovation Refunds is here to help you get money back into your business.
