Common Mistakes to Avoid When Applying for the ERC Tax Credit

June 1, 2023
Dayes Law Firm

Although the Employee Retention Tax Credit (ERTC/ERC) is widely available for many businesses to claim, there are some complexities to it that can lead to errors in the ERC application process. There are a number of common mistakes you should try to avoid when applying for the ERC tax credit, and a reputable tax professional can help you if you’re concerned about tackling the process on your own.

Common ERC Application Mistakes – Qualification

The first mistake to avoid when applying for the ERC is assuming that you definitely qualify for the tax credit. COVID-19 complications in general don’t qualify a business for the ERC – there are specific eligibility factors including whether or not you operated a business in 2020 and experienced either a full or partial suspension of the operation of their business during any quarter, or if you did so in 2021. Your business also had to have encountered a significant decline in gross receipts during either year. 

To determine your eligibility for the ERC, you can work with a team of tax professionals like the ones at Dayes Law Firm for assistance.


Another mistake some business owners make is assuming they can’t claim the ERC because they took a Paycheck Protection Program (PPP) loan. This is no longer true! 

As long as the payroll identified for the ERC was not paid out of PPP funds, a business can take advantage of opportunities to get a little financial relief for their company. If you can prove you’re not trying to “double dip,” you should be in the clear. The ERC team at Dayes Law Firm can help you work out those details as well.

Number of Employees

If your business has more than 500 employees or had more than 100 back in 2020, you might think you can’t claim the ERC. The ERC is applicable to businesses with 100 or fewer full-time employees in 2020 and then was increased to 500 or fewer full-time employees the following year, according to the IRS

However, a very important factor in calculating your number of employees for ERC purposes is whether you’re considering the difference between those who are full-time equivalent (FTE) employees and those who are not. A team of tax lawyers who understand the intricacies of the Employee Retention Credit can help you determine your official employee count for the ERTC. You might actually fall under the restriction threshold and be able to qualify!

Documentation and Avoiding an ERC Audit

The IRS has warned that “improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.” Improperly documenting your ERC application could lead to an IRS audit and a whole mess that you don’t want to have to deal with. 

One extremely important mistake you want to avoid when applying for the ERC is not documenting your claim correctly. There is always a chance the IRS could audit your application, but providing documentation about your ERC eligibility – including 

any records of your business’ substantial decline in gross receipts, information on your full-time equivalent employees and their qualified wages, and more – can potentially lessen that chance and give you an opportunity to defend yourself later, should it become necessary. 

This is another great reason to turn to trusted tax professionals like those at Dayes Law Firm for ERC assistance. We back up our work and will stand behind ERC refunds we believe are due to your business, and defend businesses with an ERC audit if needed.

Call Dayes Law Firm

Dayes Law Firm and our partners can help you avoid these common ERC application mistakes. We have proudly assisted many businesses with their ERC applications already, helping business owners file for more than $250 million in refunds so far!

Call us today for an initial evaluation and see how our tax attorneys can help you. Contact us for a no-obligation consultation – it’s free, and we can discuss all of your ERC options with you. Give us a call or fill out the form on this page to see why so many businesses have already come to us for ERC assistance, and to discover how we can help you, too.