Why Do Some Businesses Miss Out On ERTC Funds?

January 18, 2024
Dayes Law Firm

The Employee Retention Credit (ERC), a.k.a. the Employee Retention Tax Credit (ERTC), provided a lifeline for many small and medium-sized businesses that suffered during the COVID-19 pandemic. While you shouldn’t view the ERTC as something to compete with other businesses over, finding out how other companies are taking advantage of this tax benefit may be helpful. Here’s why some businesses miss out on claiming the ERTC. 

Why Many Businesses Miss Out on the ERTC

As a cautious business owner, you might be wary of applying for the ERTC, even while many of your competitors have filed their amended tax returns. You might take a quick look at the requirements and decide you probably don’t qualify. Maybe you even heard horror stories of the ERTC and your business competition involving incorrect claims that triggered IRS audits.

While you definitely shouldn’t claim the ERTC if you don’t qualify, there’s no reason for eligible employers to forgo this tax benefit. Check whether you’ve given up prematurely on the ERTC based on the following false assumptions.

1. “You Can’t Claim the ERTC If You’ve Claimed PPP”

Contrary to what many business owners think, you can claim both PPP loan forgiveness and the ERTC. Some of your competitors may have already tapped into both benefits. However, if you used PPP funds to pay wages, these wages can’t count toward the ERTC.

2. “You Don’t Qualify for the ERTC If Your Business Was Open During the Pandemic”

You could be eligible for the ERTC if your business suffered disruptions or a partial shutdown, not necessarily a full suspension, during the COVID-19 pandemic. If local, state, or federal orders related to COVID-19 wreaked havoc on your industry, other businesses in your niche have likely claimed the ERTC. And yes, you may still qualify even if your company is a nonprofit.

3. “The ERTC Isn’t for You If You Didn’t Suffer Significant Losses”

A decline in gross receipts (50% and 20% for eligible quarters of 2020 and 2021, respectively) is only one way to qualify for the ERTC. If your business partially or fully suspended operations because of government-issued restrictions, you could claim this tax credit even if you don’t pass the gross receipts test.

4. “Essential Businesses Can’t Claim the ERTC”

Even if you enjoyed the status of an essential business during the pandemic, you might be eligible for the ERTC if government-issued orders restricted your work. For example, maybe you had to limit your number of customers or suffered major inconveniences because you could only provide curbside pickup. 

How to Ensure You Claim the ERTC Correctly 

As a business owner, you want to avoid mistakes when applying for the ERTC. On the one hand, you don’t want to overstate wages and potentially face fraud accusations. On the other hand, you want to take advantage of the full available tax credit.

Working with a trusted tax professional can save you a lot of time, energy, and money when you prepare to claim the ERTC. A reputable tax lawyer or advisor can let you know whether you qualify for this credit, which wages from 2020 and 2021 are eligible, and which supporting documentation you may need if the IRS decides to double-check your claim. 

Call Dayes Law Firm for Reliable ERTC Guidance

Claiming the highest possible ERTC isn’t business competition, but you might still want to check whether companies in your industry are claiming this important tax credit. If you’re unsure whether you’re eligible for the ERTC or how much you can claim, contact Dayes Law Firm. Our diligent tax lawyers will check your records, verify your eligibility, and help you calculate qualifying wages.Call 800.503.2000 or contact us online for a free consultation.