5 Misperceptions About the ERC as it Relates to Job Security

September 11, 2023
Dayes Law Firm

It’s already been three years since COVID-19 first turned the world upside-down, but its impact on businesses lingers. Supply chains slowed, businesses lost revenue, and some owners had to close their doors. 

In response, the government introduced the Employee Retention Credit (ERC). On the surface, this credit only seems to impact employers. However, even though employees don’t directly file for the tax credit, they stand to reap its benefits.

Many employees aren’t aware of this and have many misconceptions about the ERTC. 

What Is the Employee Retention Credit?

When businesses struggled to stay afloat in 2020 and 2021, the Employee Retention Credit (ERC), a.k.a. the Employee Retention Tax Credit (ERTC), incentivized them to keep employees. The tax credit covers a percentage of employee wages up to $10,000 per employee. 

A business must have suspended regular operations or suffered a significant revenue decline to qualify. For example, essential businesses wouldn’t have shut down, but they can still qualify if they lost revenue. For 2020, businesses must have seen a 50% loss when comparing corresponding quarters to 2019. In 2021, businesses must have seen a 20% loss compared to 2019.

Five Misconceptions Among Employees About the ERTC

When people talk about the ERTC, it almost always relates to business owners. Unfortunately, not many employees are part of this conversation and may have a lot of ERTC misconceptions, including the following:

1. The ERTC Doesn’t Affect Employees

Employees may hear their bosses talking about the ERTC, but many believe it doesn’t have much to do with them. After all, it’s something their employer files for, not them. 

However, if you were a W-2 employee in 2020 or 2021, you likely benefited from the ERTC, even unknowingly. The credit helped employers continue paying their employees, providing job security. 

2. Charities Aren’t Eligible for the ERTC

If you’re an employee of a charity or a nonprofit organization, you may think you haven’t benefited from the ERTC. Employers and employees share this misconception. However, if a charity or nonprofit suffered a significant revenue decline or suspended normal operations due to government orders, they are eligible for the ERTC. 

3. Employees Can File for the ERTC

Unfortunately, employees cannot file for the ERTC credit themselves. This credit is for employers who retained employees in 2021 and 2022. Even self-employed individuals cannot file for the ERTC for paying themself wages.

4. The ERTC Doesn’t Impact Employee Wages

Before the ERTC, businesses began to lay employees off or cut wages. With the introduction of the tax credit, employers could continue paying their employees consistent wages. 

This continues today as employers collect refunds from their ERTC claims.

5. The ERTC Won’t Have Lasting Effects

Even though the ERTC only covers wages paid in 2020 and 2021, businesses can retroactively file through 2025. Moving forward, the ERTC has set a precedent for the value of retaining employees during crises and moments of hardship.

Questions About ERTC? Contact Dayes Law Firm

It’s impossible to cover all ERTC misconceptions. If you’re an employee with more questions or an employer who still needs to file for the ERTC, contact Dayes Law Firm.

Dayes Law Firm has assisted hundreds of businesses in filing for the ERTC. You could be next. Contact us at 866-567-4510 for a free consultation.