The ERTC 2023 Compliance Checklist for Businesses

The Employee Retention Tax Credit, or ERTC for short, provides funds in the form of a tax credit for qualified wages that employers paid their workers in 2020 and 2021. Given that businesses can receive up to $26,000 per employee, and the funds are a refund (not a loan), claiming the maximum eligible amount can be a game-changer for most businesses.

The key to getting the funds you’re entitled to is ensuring that you follow the guidelines set forth by the IRS. However, in September, 2023 the IRS announced a moratorium through at least the end of the year on processing new claims for the Employee Retention Tax Credit (ERTC/ERC). The agency made the drastic move because of “growing evidence of questionable claims pouring in.” That begs the question – what sort of penalties could businesses face for making false, “questionable,” or misleading ERTC claims? One way to ensure your company claim is solid includes focusing on an ERTC compliance checklist.

1. Determine Eligibility

There are a few ways to be eligible for the Employee Retention Tax Credit, including the following:

Demonstrate a decline in gross revenue by more than 50% during one or more quarters in 2020 or 20% in 2021 compared to 2019, or
Sustained a full or partial suspension of your business operations due to a COVID-19-related government mandate at the local, state, or federal level.

Eligibility is determined by quarter, so even if you experienced a decline in only a single quarter (or a handful of quarters), you can still receive ERTC funds.

2. Determine “Qualified” Wages

The point of the ERTC was to reward small businesses that kept employees on the payroll. This activity contributed to economic stability and financial security during uncertain times. With 99.9% of American businesses being qualified as small businesses, it has been imperative to help them keep their doors open.

Businesses with fewer than 500 employees can claim the credit. For larger businesses exceeding this limit, the ERTC is only available for the workers who did not provide services. Previously, the company size was capped at 100 full-time employees; however, that changed with an update of the original CARES Act. The Relief Act of 2021 increased the FTE count from 100 to 500.

Qualified wages can include more than salaries. In addition to this compensation, group health plan expenses also qualify. This is true even if you paid no other wages to the employee.

3. Review Payroll Protection Program Terms

In the original 2020 CARES Act, businesses that received PPP funds were not eligible for ERTC. However, this rule also changed. Therefore, even if you got a PPP loan, you can still qualify for the tax credit.

There is a caveat, though. Any PPP dollars that were applied to wages are not eligible for the ERTC, as that would be double dipping. On the other hand, PPP funds applied to rent and other business expenses are not deducted from an ERTC refund. You can also go back and retroactively claim this credit.

4. Gather Necessary Documentation

The IRS is cracking down on businesses that filed “improper” ERTC claims, either by fraud or mistake. In addition to undergoing an audit, additional penalties and interest charges may be applied. In order to determine eligibility and the amount of funds you are qualified to receive, you’ll need the following documentation:

Records of wages paid
Gross receipts
Government orders
Other relevant documents to prove eligibility

Find Out How Much You Can Receive in ERTC Funds

The rules regarding ERTC have undergone several changes, and it can be complex to determine how much money your business is eligible to receive. We recommend working with the experienced ERTC tax attorneys at Dayes Law Firm to assess your ERTC eligibility and get help filing a claim for the maximum funds you are qualified to receive.

To date, our law firm has filed for over $250 million in ERC tax credit claims, and a significant portion of these claims have already been paid. The Dayes Law Firm ERTC team is here for you. Contact us today at 866-567-4510 for a free consultation.