The Employee Retention Tax Credit (ERC) is a refundable tax credit available to businesses who suffered financially from the COVID-19 pandemic. Due to government regulations and restrictions, many businesses were forced to either partially or fully suspend business operations.
Small businesses and startups were also seriously impacted by declines in gross receipts during this time. Through the ERC tax credit, eligible businesses can receive financial aid when approved by the IRS.
How Much Can My Business Earn from the ERC Tax Credit?
Through the ERC tax credit, businesses can earn up to $21,000 per employee. If the amount that your business receives exceeds the amount you owe in taxes, your business will receive the rest as a refund. This refund can be spent however you see fit.
For example, you can pay wages, healthcare expenses, or business expenses to help your business recover from the pandemic. The more qualified wages you paid to employees during the 2020 and 2021 tax years, the more your business could earn if eligible.
To determine how much your business can earn from the ERC tax credit, calculate ERC before applying. With the help of an ERC specialist, you can make sure that all qualified wages are accounted for when applying.
Do I Need to Hire an ERC Specialist?
While you can certainly apply for the ERC tax credit on your own, it may not be the best option. On September 14, 2023, the IRS issued a moratorium that put an immediate pause to the processing of new applications. This was due to a surge in false claims submitted to the IRS.
Applications being processed by the IRS are falling under intense scrutiny to ensure that all information provided in the application is accurate. This has also led to even further delays in processing.
Hiring an ERC specialist ensures you that you are in good hands. An experienced ERC specialist, such as the ones at Five Start ERC Experts, provide audit protection. This protects you from any risk of an audit from the IRS for inaccurate information.
ERC specialists should have certified experience as a tax professional or tax attorney. They will not submit your application to the IRS unless you fully qualify.
How Long Does It Take to Receive the ERC Tax Credit?
While there is a deadline in place to apply for the ERC tax credit, the IRS does not have a deadline for when they approve your application and process your refund. Because of delays in ERC processing, businesses may not see their refund for 9 months.
With the recent delays due to false claims, the IRS could take even longer to process ERC applications.
Because of the delays in processing applications, businesses should apply as soon as possible to receive their refund faster. The amount that businesses receive can provide serious relief to small business and startups that struggled during, and even after, the pandemic. The deadline to apply for the 2020 tax year is April 15, 2020. The deadline for the 2021 tax year is April 15, 2021.
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Author: Sophia Williams