What Lessons Can Companies Learn from Successful ERTC Claims?

October 30, 2023
Dayes Law Firm

Are you considering claiming the Employee Retention Tax Credit retroactively? If you’re eligible, this credit could give you back up to $26,000 in refundable tax credits per employee. But properly determining your eligibility and calculating the credit accurately is important to avoid any IRS penalties. 

Looking at other businesses and reviewing how they have successfully claimed the ERTC can help you maximize your credits. Here are a few lessons from business owners who have successfully claimed the ERTC. 

Lesson 1: Be Wary of ERTC Scams

Unfortunately, ERTC scams and misinformation are rampant throughout the U.S. Those who have successfully claimed the ERTC would warn against falling for scams, instead recommending that you work with reliable tax professionals to ensure the legitimacy of your claim. 

Warning signs include: 

  • Saying that the ERTC has an “easy application process;” in reality, the ERTC is a rather complex credit that requires careful consideration 
  • Charging significant upfront fees to help you with your application
  • Saying that virtually every business qualifies for the ERTC
  • Contacting you directly to offer their services before you ever reached out to them 
  • Leaving out important eligibility details, like needing to prove that your operations were fully or partially suspended due to government orders or that you experienced a significant decline in gross receipts

Lesson 2: Triple-Check Your Records Before Filing

Accurately claiming the ERTC involves a little bit of legwork on your part. Business owners who have successfully claimed this credit will agree that the application takes careful consideration and attention to detail, and it isn’t something you should rush through. 

You’ll need to calculate the qualified wages you can claim credits for based on the number of full-time employees your business had during each applicable quarter. Before beginning these calculations, verify that your employment records are correct. Then, double- or even triple-check your calculations to ensure their accuracy before submitting your application. 

Claiming the Employee Retention Tax Credit incorrectly could land you with a penalty of 20% of the amount you overclaimed. Even if your incorrect claim was an honest mistake, you’ll likely still owe this penalty, cutting into the credits you have earned back from the IRS.

You’ll also need to make sure you avoid double-dipping with other IRS incentives, such as a Paycheck Protection Program (PPP) loan or Work Opportunity Tax Credits (WOTC)

Lesson 3: Think Carefully About How You’ll Use Your Credits

Business owners have used their Employee Retention Tax Credits for a range of purposes. Once the IRS has issued your credits, don’t immediately roll them into your capital. Instead, consider all your options carefully. 

Some business owners have used these credits to: 

  • Reward employees who worked extra hard throughout the pandemic or periods of short staffing
  • Give back to their communities
  • Stimulate business growth by investing in research and development or improving products
  • Hire more employees or give raises to existing employees

Lesson 4: Work With a Tax Attorney for ERTC Claims

Properly claiming the ERTC involves a significant amount of time and energy that you may not have as a business owner. That’s why many employers who have successfully claimed this credit turned to tax professionals for assistance. 

A tax attorney can provide personalized ERTC business assistance, ensure your eligibility, and calculate your credits based on your employment records. They can help you avoid ERTC scams and penalties and determine how many credits you may be able to claim. 

Dayes Law Firm is dedicated to helping business owners like you claim the Employee Retention Tax Credit. Contact us today at 866-567-4510 for your free ERTC consultation