Tax Attorney Tips To Make the Most of Your ERTC Benefit

August 23, 2023
Dayes Law Firm

The ERC (Employee Retention Credit) is one of the valuable tax deductions your business can claim if you experienced a significant reduction in income levels during the COVID-19 pandemic. The following tips will help you increase tax credits and use this boost in cash flow to benefit your company. 

Make Sure You Claim the Full Amount of Available ERC 

You may be eligible for the ERC if you kept employees on payroll while your business had to suspend or slow down its operations because of government-imposed restrictions related to COVID-19, and your gross receipts suffered a material decline (50% in 2020 and 20% in 2021 compared to the same quarters in 2019). 

Your business could claim up to $5,000 per employee for 2020 and up to $21,000 per employee for 2021. Working with a qualified tax professional will help you understand which wages are eligible for the ERC and avoid mistakes on your amended tax return. 

Understand the Interplay Between the ERC and PPP Loan Forgiveness

Many small businesses that suffered a loss of income during the pandemic qualify for the ERC/ERTC and Paycheck Protection Program (PPP) loan forgiveness. However, while you can claim both benefits for the same tax year, keep in mind that any wages for which you use the PPP credit would be ineligible for the ERC. 

Consult an experienced tax attorney or another competent tax professional to improve tax credit when you claim the ERC and PPP loan forgiveness. In general, you’ll want to use as much of the forgiven PPP loan amount as possible for non-payroll expenditures like rent and utilities. 

Put Your ERC Money to Good Use

An ERC refund could give your business a significant chunk of cash. What should you do with this windfall? Proper planning will help you increase the ERC tax credit and leverage it to promote your business goals. Below are a few options to consider. 

1. Give Your Workers a Cash Reward

A monetary reward can do wonders to keep your employees motivated. You can use some of your ERC refund to hand out a direct bonus or contribute toward your workers’ retirement plans. 

2. Boost Employee Benefits

ERC money can also fund other employee perks, like contributions to a health savings account, paid vacations, or expanded health insurance. These extra benefits will help you retain valuable employees and advertise your company as a desirable place of work. 

3. Clear Debt

Many businesses acquired major amounts of debt during the pandemic. If you borrowed cash to keep your company afloat, an ERC refund can help you eliminate debt or reconstruct your loans for more favorable interest rates. 

4. Make Meaningful Investments

Did you always wish your company had more money to invest in equipment and technology, develop and launch an innovative product, or purchase real estate? An ERC refund could allow you to do that without restricting your cash flow.

5. Save for a Rainy Day

Finally, you might put some of your ERC money in an emergency fund to help your company survive a future crisis.

Contact Dayes Law Firm Today and Claim the ERC for Your Arizona Business

Filing tax returns correctly is crucial when you claim the ERC to increasing tax credits and ensure your application complies with all IRS guidelines. The experienced tax attorneys of Dayes Law Firm can help you claim the highest possible amount of ERC and other available credits, like the Earned Income Tax Credit, quickly and efficiently. Call (866) 875-1005 for a free consultation with a skilled tax lawyer in Phoenix, AZ.