ERC Tax Filing Deadline. Do I Qualify?
The Employee Retention Credit (ERC) is a payroll tax refund from the United States Treasury Department applicable to businesses who kept employees on payroll during the pandemic. The U.S. Federal Government is giving out (printing!) more money for businesses that successfully maintained employees throughout the Paycheck Protection Program (PPP). The grant is $26,000 per qualified employee and requires several stipulations that we have laid out below.
If you are a small to medium-sized business, it’s likely that you were negatively impacted by the COVID-19 pandemic, and you most definitely weren’t alone. Due to financial setbacks across the country, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help get businesses back on their feet. A special section called the Employee Retention Credit (ERC),was specifically added to help businesses like yours.
The Employee Retention Credit (ERC) was developed to support employers who retained existing employees throughout 2020 and for the first three quarters of 2021, by offering a healthy payroll tax refund through the IRS. Eligible businesses can receive a refund of up to $5,000 per employee for all of 2020 and up to $7,000 per employee kept on the payroll for each quarter of 2021, from Q1 to Q3. That’s a total refund of up to $26,000 per employee that was kept on your payroll.
The ERC has not gotten the publicity it should have received, and the program has been, and still is underutilized. Many businesses have not claimed a refund or even filled out the paperwork. According to the IRS, up to 80% of businesses could be eligible for the Employee Retention Credit. Many businesses are unaware that the credit even exists.
The ERC is related to your payroll, not your business income tax returns, which is what most CPAs handle. Because of this, the credit has fallen through the cracks where few CPAs are able to effectively process it.
ERC qualifications and limitations have been amended by Congress a number of times since the initial rollout of the Employee Retention Credit. With over 200 pages of complicated ERC tax code it’s not a surprise that the program has received little attention. You should work with a CPA or ERC specialist that can provide you with the most updated information and help you get the full refund amounts that you fully deserve.
Your small business could be eligible for an ERC refund if it experienced a significant decline in gross receipts during the 2021 calendar quarter, more than a 20% decline versus the same quarter of 2019 and a 50% decline in the 2020 calendar.
You may also be eligible if you had operations that were impacted due to government orders due to COVID-19, resulting in limitations of commerce, travel, or meetings. If your business was impacted due to a government order that caused one or more of the following, you may qualify:
- Your business operations were interrupted.
- There were interruptions with your supply chain.
- There was an inability to access equipment.
- Your business had a limited capacity to operate.
- You were unable to work with your vendors.
- Your hours of operation were reduced.
- Your available services offered to customers were limited or reduced.
The actual amount of your refund is based on a number of factors including number of employees, hours worked, qualifying quarters, PPP loans, health premiums, and wages paid.
There have been many changes to the rules of the ERC program, so it is always best that you check with the IRS and your CPA for the most up to date information. Currently the real deadline to file an ERC claim for all quarters in 2020, is April 15, 2024. For all quarters in 2021, the deadline is April 15, 2025. It is best to not wait until the deadline.
IRS Form 941-X, “Adjusted Employer’s QuarterlyFederal Tax Return or Claim For A Refund,” needs to be filed in a timely manner and this form affects your ERC claim. Again, it is wise to check the IRS rules and regulations on the ERC claim and to also check with your CPA to get this refund that may be owed to you.