Common Questions Small Business Owners Ask about the ERTC
Small business owners who haven’t yet applied for the Employee Retention Tax Credit, known as the ERTC or the ERC, may have refrained from doing so because they aren’t perfectly clear about what the program is or how it works.
Here are some common questions small business owners ask about the ERTC, compiled for you by Dayes Law Firm, to encourage more employers to apply for this tax credit.
1. What is the ERTC?
The ERTC is a refundable payroll tax credit certain businesses can claim on qualified wages paid to their employees if business owners kept staff on their payroll despite major financial challenges during the height of the COVID-19 pandemic in 2020 and 2021. It was implemented through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
2. Are the ERTC and ERC Identical?
Yes. ERTC is short for Employee Retention Tax Credit, but ERC is also a popular acronym for the same tax credit program.
3. How Does a Business Qualify for the ERTC?
To qualify to apply for the ERTC, an employer must meet one of the following requirements:
- Experienced a significant decline in gross receipts in 2020 and/or 2021 as compared to 2019
- Saw operations fully or partially suspended in 2020 and/or 2021 as a result of government shutdown directives
4. Can I Still Apply for the ERTC?
Although the Employee Retention Tax Credit is not available for 2022 or 2023 tax returns, business owners can still claim the credit retroactively by amending their employment tax returns for 2020 and 2021. The deadline to claim the ERTC is three years after the original due date for your business’ tax return.
5. What is the ERTC Deadline?
The deadline for claiming the ERTC for eligible quarters in 2020 is April 15, 2024. When it comes to a deadline for claiming the ERTC for eligible quarters in 2021, the deadline and date business owners need to be aware of is April 15, 2025.
6. How Do I Apply for the ERTC?
Business owners can file an amended Form 941X (Quarterly Federal Payroll Tax Return) for past quarters in 2020 and 2021 in which a business was an eligible employer to apply for the ERTC.
7. How Much Can a Business Receive for the ERTC?
The credit maximum for the ERTC per employee is $7,000 for each employee per quarter in 2021 – equaling $21,000 in total – according to the IRS. There is a maximum credit of $5,000 per employee in 2020, so in total, a business owner could potentially claim up to $26,000 per employee.
However, the IRS has capped the ERTC for Recovery Startup Businesses at $50,000 per calendar quarter.
8. Is the ERTC a Loan?
The Employee Retention Tax Credit is a fully refundable tax credit available through a federal government program. It is available for some employers to claim against certain employment taxes and is not a loan. It does not need to be paid back to the government.
9. Do I Need to Work with a Specialist to Claim the ERTC?
If you’re a business owner looking to claim the ERTC, you do not need the assistance of someone experienced in helping people apply for the tax credit. However, there are many reasons other businesses have gone this route.
A trusted tax professional can work out your estimated ERTC refund amount and assist you in gathering all the right information to make your ERTC claim. They can take a lot of the work of actually applying for the Employee Retention Tax Credit off your plate so you can focus on your business. And, possibly most importantly, they can handle any IRS inquiries that may come up in regard to your ERTC application.
For instance, at Dayes Law Firm, we will defend any businesses we work with against an ERTC audit or if there is ever a request for an audit in the future. We will stand behind refunds we believe are due to your business and our team is willing to go the extra mile to prove to the IRS that you deserve your ERTC funds.
Please feel free to contact us and get in touch with a member of our team to discuss the needs of your business when it comes to the Employee Retention Tax Credit. We can offer a free consultation regarding any ERTC questions you may have and believe we can prove to you that we are the right partners to help you pursue your ERTC refund.
Give Dayes Law Firm a call today to learn more! We look forward to hearing from you.