The Role of the ERTC in Strengthening Businesses

October 24, 2023
Dayes Law Firm

In 2020, the government introduced the Employee Retention Tax Credit (ERTC) as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The American Rescue Plan Act made several changes to the CARES Act that broadened the eligibility requirements for this valuable payroll tax credit.

If you’ve claimed the credit, you may be unsure how to spend the money. Learn about ERTC benefits for businesses and how to use the credit to strengthen your company.

How the ERTC Can Make Businesses Stronger

During the COVID-19 pandemic, hundreds of business owners were forced to lay off or furlough employees, and many even had to close their doors for good. In response, the government introduced the ERTC to help floundering businesses survive.

With this money, you can reopen your business, bring back former full-time employees, or hire new workers for your team. You can also use the credit to pay off debts and overdue bills for your company.

If you have cash remaining after repairing your business, you can use the money to help your company grow. Here are just a few examples of what you can do with the ERTC:

  • Improve your benefits program by adding perks such as fitness memberships, free childcare, more paid time off (PTO), better health insurance, and discounted counseling sessions.
  • Purchase that new equipment you’ve had your eye on.
  • Move to a bigger office space if you don’t have enough room to serve all of your customers.
  • Research, test, and launch a new product.
  • Partner with other local businesses.
  • Purchase a franchise, such as a gas station or restaurant.
  • Buy advertising for your business, such as TV commercials, email marketing campaigns, and pay-per-click (PPC) ads.

The ERTC is a tax credit, not a loan, which means you can spend the money on anything you want. As the saying goes, the sky truly is the limit.

Do Your Business Qualify for the Credit?

All those ERTC benefits for businesses sound great, but does your business qualify? It does if you meet one of the following requirements:

  • You had at least a 20% drop in gross receipts for 2021 or at least an 80% drop in your receipts for 2020
  • You had to partially or fully close your business because of a government order

Eligible employers can claim:

  • 50% of qualified wages, up to $10,000, per employee for 2020
  • 70% of qualified wages, up to $10,000 per employee per quarter, for 2021

If you’re eligible, you can claim a credit that’s worth:

  • Up to $5,000 per employee for 2020
  • Up to $7,000 per employee per quarter for 2021

How Do You Claim the ERTC?

If you’re hunting for an ERTC application but can’t find one, that’s because it doesn’t exist. To claim the credit, you must file IRS Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund

In September, the IRS announced “an immediate moratorium through at least the end of the year on processing new claims for the pandemic-era relief program” as a result of increased fraud concerns. 

IRS Commissioner Danny Werfel noted in the announcement, “The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in,” and urged that when it comes to claiming the credit, “businesses should seek out a trusted tax professional who actually understands the complex ERC rules.”

If it’s been more than six months and you still don’t have the credit, call the IRS helpline at (800) 829-1040.

Not Sure Whether You’re Eligible? Call Dayes Law Firm

ERTC benefits for businesses can be a lifesaver for owners having trouble keeping their companies afloat. If you’d like to claim the credit but don’t know whether you qualify, reach out to Dayes Law Firm at (866) 567-4510 today.