What Happens if You Overlook Filing an ERTC Claim?
By this point, you have probably heard about the Employee Retention Tax Credit, or ERTC for short. If your organization has elected not to file an application for ERTC, you could be missing out on more than just the up to $26,000 in tax credits per employee on your payroll.
As a reminder, this government incentive was implemented as part of the CARES ACT (Coronavirus Aid, Relief, and Economic Security), and claiming ERTC benefits requires filing an employment tax return or an amended Form 941-X to retroactively initiate the ERTC claim process.
While there are no penalties for not submitting for ERTC benefits, it could put your business at a significant financial disadvantage if you choose not to do so.
The financial implication of forfeiting the credit is one potential consequence. There are also several reputational consequences to consider regarding opting out of filing an ERTC claim when you qualify.
Employee Morale and Retention
For the 3.6 million businesses across the country who have claimed the ERTC thus far, the funds have served as either a financial lifeline or a welcome influx of cash that can be used to grow and reinvest for the health of the business.
If your employees are aware of the ERTC program and it comes to their attention that you have not submitted a claim, it could have an adverse effect on both employee morale and retention. For example, if budget constraints have delayed raises, bonuses, or new equipment purchases, it could lead employees to believe that there is not enough cash in the bank, and it is irresponsible not to claim a “free” incentive from the government.
Notably, employees who question decision-making or the future health of an organization are more likely to leave.
In an ideal world, the financial affairs of your business would be kept private. However, this may not always be the case. Situations that could expose not filing for the ERTC include:
- Disclosing financial statements to investors, lenders, or regulatory bodies
- Required disclosures for publicly traded companies
- Employees sharing this information with colleagues or the public at large
Lack of Awareness
In the early days of the CARES Act and the supporting programs like the ERTC, it was natural for there to be a lot of confusion about the rules. After all, the ability to submit ERTC reimbursement requests for 2020 and 2021 tax returns has been extended to 2024 and 2025, respectively.
Because of the confusion and the changing rules, it was almost expected that businesses would be delayed as they did their research and due diligence, and found qualified legal and tax professionals to ensure that the credits they claimed were accurate.
However, at this point, a business that is not aware of the ERTC and fails to claim it could be perceived as a lack of responsiveness to changing economic conditions. A savvy business owner is expected to be aware of available incentives and move quickly to take advantage of them.
Work With a Tax Professional To Claim the Employee Retention Tax Credit
Employee Retention Tax Credit submissions may not be slowing down, but the deadline is fast approaching. Contact Dayes Law Firm at 800.503.2000 to schedule a free consultation. We can help you determine eligibility for the ERTC and calculate how much your claim is worth.