Do You Have to Pay Back the Employee Retention Credit?

August 30, 2023
Dayes Law Firm

With less than a year remaining until the first Employee Retention Credit (ERC/ERTC) deadline arrives, business owners that haven’t yet applied for the tax credit should start considering whether they want to do so and what their plan is to start the process of claiming the credit. Some might be holding off because they believe the ERC is a loan, but do you have to pay back the Employee Retention Credit, or not?

All About the Employee Retention Credit

The ERC is a payroll tax credit certain businesses can claim on qualified wages paid to their employees if they kept staff on payroll despite significant financial setbacks during the height of the COVID-19 pandemic back in 2020 and 2021.

The Employee Retention Credit was implemented as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. To keep it short and simple, employers that experienced either a full or partial shutdown of operations as a result of a governmental order related to COVID-19, or businesses that experienced a decline in gross receipts in 2020 or 2021 as compared to the same quarter in 2019, may be eligible to qualify for the ERC. 

At this time, employers can claim the credit retroactively by amending past employment tax returns. But time is running out to do so because the two deadlines for claiming the ERC in 2023 are:

  • April 15, 2024, for all quarters in 2020, and
  • April 15, 2025, for all quarters in 2021.

Do You Have to Pay Back the ERC?

The Employee Retention Tax Credit is a fully refundable tax credit that eligible employers can claim against certain employment taxes and is not a loan.

That means it does not have to be repaid, as long as the business was actually eligible to apply for the ERC in the first place and provided your business doesn’t get more in ERC funds than it was actually entitled to. “Improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest,” the IRS warned in a news release in March 2023. 

ERC Application Assistance 

The Employee Retention Credit is not a loan and does not need to be paid back to the government as long as your business is actually eligible to claim it. If you are at all unsure of your business’s eligibility, you should consider working with a trusted tax advisor on your ERC application process. 

A tax professional or attorney like those at Dayes Law Firm can help. The firm and our partners have already helped business owners file for more than $250 million in refunds so far, and our clients have already received over $25 million in funds for ERC tax credit claims. 

Our team may be able to help you and your business, too. Please feel free to contact Dayes Law Firm for assistance with any ERC questions you may have, particularly if you’re unsure of whether or not your company can even apply for the tax credit. 

Our firm can offer a free, no-obligation consultation to discuss the needs of your business before the ERC program comes to an end. You can fill out the form on this page or give us a call at 1-866-875-1005 to speak with a Dayes Law Firm ERC team member and learn how we may be able to assist you. We hope to hear from you soon!