FAQs

Questions About the Employee Retention Tax Credit (ERTC)

The Employee Retention Tax Credit (ERTC) is a refundable credit for businesses of up to $5,000 per employee for 2020 and up to $7,000 per employee per quarter for the first 3 quarters of 2021. The ERTC was authorized by the government-approved CARES Act in 2020 and updated in both the Consolidated Appropriation Act and Infrastructure Investment and Jobs Act in 2021. It was designed to provide federal aid to businesses affected by COVID lockdowns and encourage employers to keep employees on their payroll. The Employee Retention Tax Credit comprises the largest available cash credit available for businesses, but very few businesses know it exists.

One of the most common misconceptions business owners have about the ERC is that they believe they do not qualify for the ERC if they took a round of PPP funding. However, the Consolidated Appropriations Act of 2021 changed the rules, allowing PPP recipients to also receive the ERC if they are eligible.

Wages used to qualify for PPP loan forgiveness cannot be used to calculate the amount of your ERC. However, any wages that were not used to qualify for PPP loan forgiveness can be used for the employee retention credit. These rules are part of the IRS ERC guidelines to prohibit small business owners from “double-dipping”.

Navigating through the ERTC filing process can get complex quickly. At RefundsPro, this is our specialty, and we have assisted hundreds of small and medium-sized businesses with their filings. We have a network of affiliated CPAs and tax professionals who have established best practices to get you the amount you qualify for. We are so confident in our process that we only receive payment once your business receives its tax refund. RefundsPro has simplified and de-risked this process for your business.

Due to recent changes, more businesses than ever can now qualify for the Employee Retention Tax Credit:

  • A trade or business that was fully or partially suspended or had to reduce business hours due to a government order, OR
  • An employer that had a significant decline in gross receipts, OR
  • A business impacted by significant supply chain interruptions because of a government order, OR
  • A business that was started after Feb 15, 2020

If the business owner (or a married couple) owns less than 50% of the business, then those wages along with the wages of family members are likely eligible to be claimed for the ERTC credit.

We get this question quite often and unfortunately, the majority of tax professionals don’t know about this credit, the proper way to apply for it, or the correct qualification criteria. Our network of CPAs and tax experts specialize in this area of the tax code, and we have helped hundreds of small businesses apply.

No, the ERC is not considered taxable income.  However, under IRC Section 280C, employer tax credits create a reduction in wages in the amount of the credit.  This reduction occurs in the year the wages were paid – so, a 2021 credit must be reflected on the 2021 tax return.  We provide you with the associated documents to give to your tax preparer.  And once you receive all the refund checks, you should provide copies of those to your tax preparer as well.

The current timeframe is between 6-9 months after your claim is submitted. We also partner with a financing company who can advance your refund (for a fee). RefundsPro monitors the status of your refund and alerts you when the refund is issued.

No, not all wages that you pay to employees may be qualified wages for the purposes of the ERC.  Different dollar limits apply and the rules vary by the quarter for which you’re claiming the ERC.

  1. Qualification is determined by affiliated tax professionals who are experts in ERC. If they believe you do not qualify, you will be told that.
  2. Clients are able to engage and ask questions to the tax professional to make sure they are comfortable with and understand how their business qualifies.
  3. Tax professionals provide workpapers and qualification spreadsheets upon request.
  4. All of RefundsPro affiliated tax professionals sign the returns as the paid preparer and are available for any ERC related questions.

Should your ERC claim be audited, RefundsPro will pay up to $5,000 to a tax professional to defend your claim. RefundsPro maintains a network of affiliated CPAs and tax attorneys with audit experience.

It is recommended that you keep all relevant documentation in case of an audit, which include:

  • Government orders suspending operations or limiting capacity and how those orders affected your ability to operate.
  • Revenue/gross significant decline receipts records (company financials)
  • Qualified health plan expenses allocated to wages
  • Completed employment tax returns claiming the credit
  • Payroll data and tax forms that demonstrates qualified wages paid during eligible quarters

RefundsPro recommends records be retained for 6 years from filing for the ERC.

Please refer to your contracts for more information and important details on these matters. RefundsPro does not guarantee the final results of any particular audit.

On 9/14/2023, the IRS made an important announcement of “an immediate moratorium through at least the end of the year on processing new claims for the pandemic-era relief program to protect honest small business owners from scams.” The full press release can be found here.

This action is a direct result of a recent increase in suspicious and fraudulent claims, driven by companies promising large refunds with little-to-no due diligence and exploiting the eligibility criteria.  

RefundsPro and its affiliated tax professionals follow the IRS guidelines and will continue to serve eligible clients now and after the moratorium has been lifted.

What does that mean for existing claims?

ERC claims filed prior to the September 14th date  will continue to be processed, but with enhanced scrutiny. Part of the IRS plan is to add additional safeguards to protect taxpayers which includes a 90-180 day processing timeline and potential added documentation requirements.

Is it even worth filing now?

Yes, it is still worth it to continue the process to determine your eligibility for the ERC. The IRS says that new ERC claims filed after September 14th will not be processed before the end of 2023. And they state that new claims should start to begin processing in early 2024.

What is the RefundsPro process?

  1. Qualification is determined by tax professionals who are experts in ERC. If they think they do not qualify, you will be told that.
  2. Clients are able to engage and ask questions to the tax professional to make sure they are comfortable with how their  business qualifies.
  3. Tax professionals provide workpapers and qualification spreadsheets upon request.
  4. All of RefundsPro affiliated tax professionals sign the returns as the paid preparer .

Under current rules, a business that qualifies for the ERC can make a claim 

(1) until April 15, 2024, for qualified wages paid between March 13 and December 31, 2020, and 

(2) until April 15, 2025, for qualified wages paid between January 1, 2021, and September 30, 2021.

In other words, the deadline for all 2020 filings is April 15, 2024 and the deadline for all 2021 filings is April 15, 2025.

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Five Common Misconceptions about the ERC:

​I was open during COVID so I won’t qualify.

False!

I received PPP so I cannot get this (ERC) employee retention credit. 

False!

I have to pay to pay the ERC back.

False!

I did not have a drop in revenue during the whole year so I won’t qualify. 

False!

I am a non-profit and cannot get the ERC.

False!