What Are the Top 10 Key Takeaways From IRS Guidance on the ERTC?

November 8, 2023
Dayes Law Firm

If you’re a business owner and some of the particulars of the Employee Retention Tax Credit (ERTC/ERC) are confusing to you, you’re not alone. Applying for the credit is not as simple as checking off a box and calling it a day. But the IRS offers key guidance on the ERTC if you’re struggling to understand it. 

Key Takeaways From IRS Guidance on the ERTC

The IRS has several pages dedicated to the Employee Retention Tax Credit on its website. And across those pages are some key takeaways about the ERTC you may want to keep in mind if you’re looking to apply for the tax credit. 

First, the agency includes eligibility highlights on its main ERTC page. It notes that the ERTC is, “available to eligible employers that paid qualified wages to some or all employees after March 12, 2020, and before January 1, 2022.”

The IRS also has key takeaways on what businesses and tax-exempt organizations qualify for the tax credit. It notes that businesses that were shut down by a government order due to the COVID-19 pandemic during 2020 or the first three calendar quarters of 2021, or businesses that experienced the required decline in gross receipts during the eligibility periods during 2020 or the first three calendar quarters of 2021, or businesses that qualified as a recovery startup business for the third or fourth quarters of 202 are eligible. 

A third vital takeaway from IRS guidance on the ERTC involves limitations to the ERTC. One major example is that employers can’t claim the Employee Retention Tax Credit on wages reported as payroll costs for Paycheck Protection Program loan forgiveness. You can still claim the ERTC if you received a PPP loan, but you can’t “double dip” and use those same wages. 

Under its Frequently Asked Questions page about the ERTC, the IRS also offers guidance about specific, common inquiries business owners may have about claiming the credit. For instance, what is the deadline to claim the ERTC? The IRS reported, “Generally, for 2020 tax periods, the deadline is April 15, 2024. For 2021 tax periods, the deadline is April 15, 2025.”

More Key ERTC Takeaways from IRS Guidance

The IRS offers plenty more takeaways about how to claim the ERTC and general guidance on the program. For instance, if you want to know how to claim the ERTC, the IRS not only notes that you only need to fill out Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, but offers a link to do so!

The IRS also has important guidance on its ERTC FAQs page about claiming the ERTC as a Recovery Startup Business. A Recovery Startup Business is a business or organization that started operations after February 15, 2020, “and had average annual gross receipts of $1 million or less for the three years preceding the quarter for which they are claiming the ERC,” the agency revealed. 

One extremely important piece of IRS guidance that businesses should pay attention to from the IRS is its recent moratorium on processing of new ERTC claims. In mid-September, the IRS announced an “immediate stop to new Employee Retention Credit processing amid surge of questionable claims.” The main point is that no new claims will be processed until after the year’s end, but the agency hasn’t completely suspended taking ERTC applications. To learn more, please review this news release.

In October, the IRS also released guidance on when applicants can expect to receive their ERTC. Unfortunately, while the agency is indeed processing claims received before September 14, “processing has slowed due to the complexity of the amended returns” and the process is delayed while all current claims are being reviewed. 

For those who may be worried that their claim is ineligible after all, the IRS also has key information on how to withdraw an ERTC claim. The steps differ depending on certain factors, like whether you’ve acquired a refund or whether or not you’ve received notice of an audit on your Employee Retention Tax Credit claim. Long story short, it may be possible to withdraw your claim, and the IRS recommends working “with a trusted tax professional if you need help or advice on this process or on the ERC.”

Finally, the IRS offers guidance on choosing a tax professional to work with on any tax preparation matters, but the agency links to it on a lot of its information on claiming the ERTC specifically. When announcing the processing moratorium, IRS Commissioner Danny Werfel advised, “Businesses should seek out a trusted tax professional who actually understands the complex ERC rules.” A team of tax professionals, like the ones at Dayes Law Firm, absolutely fit the bill.

Working With Tax Professionals on the ERTC

There’s a lot to keep track of when it comes to the ERTC. And even the IRS recommends working with a tax professional you trust if you need assistance with the tax credit! 

The team at Dayes Law Firm thoroughly understands tax law and has already helped hundreds of businesses with Employee Retention Tax Credit claims. We can walk you through every step of the claims process and answer any questions you may have about the ERTC or IRS guidance related to it. 

Please contact us by giving us a call at (800) 503-2000 to learn more. We look forward to working with you!