ERC Filing Timeline – What to Expect in 2023
The Employee Retention Tax Credit (ERC or ERTC) continues to be a saving grace for many businesses that suffered the financial and/or regulatory impact of the COVID-19 pandemic. The ERC is a refundable tax credit designed to reimburse qualifying employers for costs related to retaining employees during 2020 and 2021. However, the process of claiming the ERTC can be lengthy and complex, and business owners may not know what to expect in terms of the timeline for claiming the ERC and receiving their ERC refund. Here are the steps involved in claiming the ERTC and how long each step can reasonably be expected to take.
Step 1: Determine ERC Eligibility
Not every business is eligible for the Employee Retention Credit, so the first step is to determine if your business qualifies for the ERC. There are two ways that a business can qualify – one involves a significant reduction in revenue, and the other, a full or partial suspension of a business’s operations due to government mandates. The rules regarding ERC eligibility are complex and can be confusing to decipher. It is wise to seek professional assistance with your ERC filing if you’re uncertain as to your business’s eligibility for the ERC.
Expected Time: This step can take a few days to a few weeks depending on how quickly the business’s financial information, and information on any relevant government restrictions, can be gathered and analyzed.
Step 2: Calculate the ERC Amount
Once ERC eligibility is established, the next step is to calculate the amount of your business’s ERC claim. This is not a simple process. For 2020, the ERC is equal to 50% of qualified wages paid per employee during eligible periods (up to $5,000 per employee for the year). For 2021, the credit amount is 70% of qualified wages paid per employee during eligible periods (up to $7,000 per employee per quarter, excluding Q4). Accordingly, the maximum per-employee benefit is $5,000 for 2020 and $21,000 for 2021. However, most eligible businesses do not qualify for the entirety of the ERC eligibility window (Q1 2020 – Q3 2021).
It is essential that a business’s ERC claim be calculated accurately to avoid erroneously claiming more than actually entitled to, or in the alternative, leaving money on the table that the business is lawfully entitled to.
Expected Time: This step can take a few days to a few weeks, depending on the complexity of the business’s payroll and accounting systems.
Step 3: File the ERC Paperwork with the IRS
Once the ERC claim amount is calculated, the business must claim the credit on its quarterly federal tax return, Form 941. Since the ERC is only available for certain quarters of 2020 and 2021, this involves amending an already-filed tax return by completing and submitting Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return, for each applicable quarter.
Expected Time: This step can take several weeks, depending on how quickly the necessary paperwork can be prepared and completed.
Step 4: Wait for ERC Processing
Once the ERC tax forms are filed, the IRS will process your business’s ERTC claim. Once the claim has been processed and approved, the IRS will issue your business a tax refund for each eligible quarter.
Expected Time: This step can take several weeks to many months, depending on the volume of claims being processed by the IRS. Wait time may also depend on the size of your business’s claim.
Claiming the ERTC can be a lengthy and complex process for business owners. It can take months from start to finish, depending on the complexity of the business’s financial information, the ease of obtaining payroll reports and other relevant information, and the volume of claims being processed by the IRS. However, there are ERC loan and financing options available for businesses that need their funds advanced while they wait for the credit to be processed. A comprehensive ERC service like ERTC Funding can assist businesses with both claiming the ERC and obtaining advanced funding of an ERC claim. Contact our ERC experts to find out how we can assist your business today.