How Does the ERTC Differ From Other Business Incentives?

October 3, 2023
Dayes Law Firm

The Employee Retention Tax Credit is a unique program first implemented back in 2020 as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). It is different from other government incentives, and if you don’t understand the particulars of this tax credit compared to others, you might want to consider turning to tax professionals like the ones on the team at Dayes Law Firm for assistance with your ERTC application. 

How the ERTC is Different from Other Government Incentives 

The ERTC was created as an incentive for businesses that kept employing W2 staff even as business owners experienced major financial setbacks during the height of the COVID-19 pandemic. Businesses that experienced fully or partially suspended operations due to government orders during the early months of the pandemic or businesses that encountered a significant decline in gross receipts between March 2020 and December 2021 as compared to the same quarter in 2019 may be eligible to claim the ERTC.

The Employee Retention Tax Credit is a payroll tax credit, not an income tax credit. The ERTC is refunded as a payment that businesses receive from the IRS.

Employers can potentially receive up to $5,000 per full-time employee paid during 2020 and up to $7,000 per quarter per full-time employee paid during the first three quarters of 2021. That means a business owner could ultimately see a total of $26,000 refunded from the IRS thanks to the ERTC. 

The Employee Retention Tax Credit also differs from many other government incentives for businesses because it hasn’t been expanded to continue into this current tax year or made permanent. As a business owner, you can’t claim the ERTC for 2022 or 2023 tax years and instead will need to apply for the credit retroactively by completing Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

Specifically, the ERTC is different from another popular COVID-19-era government program: Paycheck Protection Program (PPP) loans. PPP loans are forgivable loans – in fact, an NPR analysis of data released in January 2023 by the Small Business Administration found that 92 percent of PPP loans issued were granted full or partial forgiveness.

Meanwhile, the ERTC is not a loan and does not have to be repaid. As long as your business is actually eligible to apply for the Employee Retention Tax Credit, you don’t need to pay back the funds you receive through the program and can use it in many ways to benefit your business

Dayes Law Firm ERC Application Assistance 

The team at Dayes Law Firm and our partners are available to offer assistance with determining eligibility for and applying for the Employee Retention Tax Credit. Our tax professionals are highly skilled and thoroughly understand the tax code, with a keen awareness of how the ERTC differs from other government incentives and tax credits for businesses. 

Please contact us for a free, no-obligation evaluation regarding any of your ERTC questions or concerns. Call Dayes Law Firm at (800) 503-2000 or fill out the form on this page to learn more.