Did you keep employing people while your business suffered losses or disruptions during the COVID-19 pandemic? The Employee Retention Tax Credit (ERTC) could give you a big cash boost. You could use ERTC money to reward employees, pay off debt, or grow your business.
Are you eligible for this attractive tax credit? Let’s demystify the ERTC for small businesses.
Do You Qualify?
You may be able to claim the ERTC if you kept workers on payroll during the pandemic and if:
- Your business had to stop or slow down operations in response to a government order, OR
- Your gross receipts dropped by at least 50% for eligible quarters in 2020, or at least 20% in 2021, compared to the same quarter in 2019
The ERTC program ended under the Infrastructure Investment and Jobs Act in September 2021. However, you can still file an amended tax return if you haven’t claimed the credit yet. The respective deadlines for 2020 and 2021 are April 15, 2024, and April 15, 2025.
The Nuances: Beware of ERTC Pitfalls
If you had to deal with major losses and/or a government-mandated full or partial suspension of your business activities while COVID was raging, you might decide, “I think I qualify. I should go ahead and file an amended tax return as soon as possible, right?”
Not so fast. You need to understand the rules of the ERTC for small businesses to avoid mistakes when you file. For example, usually, you can’t include owner wages when calculating the credit.
Along with legitimate claims, the IRS must sift through a deluge of fraudulent or mistaken applications. Because of this, the Internal Revenue Service now closely checks each claim. Returns that seem suspicious may trigger extra scrutiny or even a full IRS audit, something no business owner wants.
You can save a lot of time and stress by working with a knowledgeable tax lawyer. A tax attorney can help you, first, understand whether you’re eligible for the ERTC, and second, what amount you can claim.
What Can You Do With the ERTC?
By claiming the ERTC, you may potentially collect up to $26,000 per worker. For many businesses, this translates into a lot of money. It’s important to have a plan for this windfall so that you use it wisely and don’t let it dissipate. You can use ERTC funds in many ways.
Eliminate Debt
Has your business, like many other companies, been struggling to cover debt? The ERTC could give you a chance to do this at once. You could pay your lenders, free up cash flow, and start with a clean financial slate. You could also save some of the money for a rainy day.
Bolster Employee Benefits
A cash boost is an opportunity to invest in your team. You could expand your benefits plan, start a workplace wellness program, give out a generous bonus, or otherwise use this tax credit to show your employees that you value and appreciate them.
Grow Your Business
The ERTC can give you the chance to start a business venture you’ve long dreamed of. You can use these funds to launch a new product, start an ambitious ad campaign, buy innovative equipment, or run in-depth market research. You could even acquire another company or purchase real estate as a business investment.
Call Dayes Law Firm for Help With Your ERTC Claim
If you’re unsure about the rules of ERTC for small businesses, contact Dayes Law Firm. Our qualified tax lawyers will let you know whether you’re eligible, help you calculate your available credit amount, and walk you through the steps of filing a claim. Reach out to us at (800) 503-2000 for a free consultation today.