The Employee Retention Tax Credit (ERTC/ERC) offered a major financial lifeline to many businesses that suffered as a result of the COVID-19 pandemic. The tax credit that businesses can claim on qualified wages paid to their employees during certain time periods has the potential to result in a refund of thousands of dollars per employee. But does the ERTC have to be paid back?

Refundable Tax Credit

The ERTC was implemented through the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. It is a refundable tax credit and quarterly payroll tax filings from 2020 and 2021 qualify for the ERC. Specifically, employers can claim the ERTC for qualified wages paid in 2020, as well as quarters 1, 2, and 3 of 2021.

The key word here is “refundable.” Again, the Employee Retention Tax Credit is a fully refundable tax credit that eligible employers can claim against certain employment taxes. To be clear, the ERTC is not a loan and does not have to be repaid – at least, not for the most part.

However, as with many things involving taxes, there are exceptions to this rule and certain circumstances that can complicate things. 

Repaying the ERTC

If your business was not actually eligible to apply for the ERTC, there’s a chance you could be audited by the IRS and need to pay it back – at the very least. In addition, you could also face financial penalties, which no small business owner wants to contend with. 

That is not a situation you want to find yourself in, so if you have not already applied for the Employee Retention Credit and are not 100 percent sure you are eligible to do so, you should check with a trusted tax advisor before moving forward. 

As another example, you might need to pay back some of your ERTC refund if you somehow got more money than you were entitled to. This is another good reason to have a tax professional experienced in ERTC matters involved in your application process. 

Additionally, if you received a Paycheck Protection Program loan, you might qualify for ERTC as well, but you cannot use wages to calculate the ERTC that were also used to qualify for PPP loan forgiveness – this is known as double dipping, and is not allowed. If you use the same wages for both, it’s possible you’ll have to pay some of that money back and potentially face IRS penalties

Contact Dayes Law Firm for ERTC Help

As a general rule, businesses do not have to pay back the ERTC. But tax matters can get complex, and it might be a good idea to have tax professionals with a successful track record in helping businesses apply for the ERTC on your side if you’re looking to claim the credit. 

That’s how Dayes Law Firm can help! The team at Dayes and the firm’s partners have already helped business owners file for more than $250 million in refunds so far, and we can help you and your business, too. 

Please feel free to contact our firm for assistance with any ERTC questions you may have. We can offer a free, no-obligation consultation to discuss the needs of your business and whether or not it’s eligible to retroactively apply for the Employee Retention Tax Credit.

Fill out the form on this page or give us a call at 1-866-875-1005 to speak with a member of the Dayes Law Firm ERTC team and learn more today!