Does My Business Qualify for the Employee Retention Credit?

The Employee Retention Credit (ERC) came about during the emergence of the COVID-19 pandemic in  March 2020 as a way to incentivize small businesses to keep full-time employees on the payroll instead of laying them off due to the sharp economic downturn. The credit was part of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The program was extended through June 2021 in the Consolidated Appropriation Act of 2021. It allowed employers who qualified for Paycheck Protection Program (PPP) loans to apply. Then this past March, the American Rescue Plan added a new business type, “recovery startup business,” to be eligible for the credit and extended it through the end of 2021.

How can my business claim the employee retention credit (ERC) now?

Though the program has ended, an employer can file an amended tax return to claim the credit. There are many complicated rules governing the credit that affect who is eligible and for what amounts. Businesses only qualify in one of two ways: either their operations were fully or partially suspended due to a government shutdown or they had a significant reduction in gross receipts.

Watch Out for ERC Mills

You should beware of ERC Mills, fraudulent marketers who claim they can help employers qualify and apply for the credits for a fee or a percentage of the credit, even when they don’t qualify. To better flag fraudulent tax returns, a Treasury Department watchdog known as the Treasury Inspector General for  Tax Administration recently updated their identity theft fraud filter on a backlog of roughly 207,000  unprocessed amended returns claiming the benefit. The filter identified 11,096 potentially fraudulent returns amounting to more than $2 trillion in claims.

Our Accounting Firm Can Help Review Your ERC Eligibility

If your business weathered the pandemic and continued to employ staff, make sure you review this business credit opportunity. We strongly recommend you use a reputable outside accounting firm like The  Whitlock to review eligibility requirements and assume that your return will be audited by the IRS.  Never trust unknown outside providers who promise benefits that you may not be eligible for. Give us a call at (417) 881-0145 today.