Can I Still Claim the Employee Retention Credit (ERC)?
Many employers are still recovering from the effects of the COVID-19 pandemic. Between business closures, government restrictions, supply chain issues, and other obstacles, the pandemic impacted businesses of all sizes and in nearly every industry.
One program that the federal government has established to assist with employers’ pandemic recovery is the Employee Retention Credit (often abbreviated as the ERC or ERTC). The ERC is a payroll tax credit that was first implemented in March of 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The ERC was established to help employers with their payroll expenses so they could keep employees on payroll, even if business was slow (or nonexistent). All types and sizes of businesses can qualify for the ERC, including non-profit organizations, subject to meeting one of the 3 eligibility criteria – a Significant Decline in Gross Receipts (SDGR), a Full or Partial Suspension of Operations due to government orders (FPSO), or a Recovery Start-up Business (RSB).
Under the ERC rules, businesses are eligible to receive a tax credit based on a percentage of qualifying wages paid to employees during eligible periods between March 13, 2020 and September 30, 2021. (The rules are different for RSBs.) The maximum credit is $5,000 per employee in 2020, and $7,000 per employee per quarter in 2021.
Although the ERC applies only to wages paid in 2020 and 2021, it isn’t too late to apply for the credit! Employers can still receive the ERC retroactively by amending their Employer’s Quarterly Federal Tax Return (941) forms for the impacted quarters. Unfortunately, there is a wealth of incorrect information available online regarding the deadline to claim the ERC. One common misconception is that employers have exactly three years from the date that they filed their Forms 941 to amend them and claim the credit. If this were the case, the exact deadline to claim the ERC would vary per company based on the date the applicable Form 941 was originally filed.
However, this is not actually the case. In fact, for statute of limitation purposes, all quarters are treated as being filed on April 15th of the following year, and the three year deadline is calculated based on this date. So, this means that the deadline to claim the ERC credit for wages paid in 2020 is April 15, 2024, and the deadline to claim the credit for wages paid in 2021 is April 15, 2025.
The ERC eligibility rules are complex and have undergone many changes since the credit was first established. Additionally, some of the ERC guidelines are different for wages paid in 2020 versus those paid in 2021. ERTC Funding’s experienced ERC professionals can help determine your company’s eligibility to claim the ERC.
One important change that was made since the ERC’s inception is the ability for businesses to receive both the ERC and a Paycheck Protection Program (PPP) loan. Initially, a business couldn’t receive the ERC if it had obtained a PPP loan. However, in December of 2020, this rule was retroactively changed. Qualified employers can now receive both a PPP loan and the ERC tax credit. This means that many businesses that initially discounted the ERC as unavailable to them should take another look at whether they might qualify.
So, although the program has officially ended, eligible employers can still retroactively claim the ERC in 2022 – and beyond. An employer that did not initially claim the ERC can complete a Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return, for the relevant calendar quarters.
The ERC rules and guidelines can be confusing and complex, and many business owners have questions or are unsure if their business qualifies for the ERC. ERTC Funding has helped numerous businesses across various industries gain access to the funds they are rightfully entitled to under the ERC program. Our ERC professionals, tax experts and legal counsel can help evaluate whether or not your business qualifies for the ERC and assist with the Employee Retention Tax Credit claiming process. As an added bonus, due to the oftentimes significant delays in IRS processing of ERC claims, ERTC Funding also offers upfront financing options via our ERTC Advance Loan Program that may be available if your business needs the money now.