Employer Retention Credit

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The Employee Retention Credit (ERC) is a program that was designed to provide financial assistance to employers that were required to shut down during the Covid-19 pandemic or were unable to conduct regular operations due to government orders, but were able to keep their employees on the payroll.
The periods that qualify for the ERC, begin after 3/12/20 and end before 01/01/22, and require that the business continued to pay its employees’ wages during those periods.

The maximum credit an eligible employer can receive for qualified wages paid to any employee is $26,000 per employee. As a result, many ERC- specific companies and payroll companies are out to help you obtain this credit for a hefty commission that is generally ten to fifteen percent of the credit they determine your business is qualified to receive.

While many of these companies may be legitimate and do a good job in qualifying you and applying for the credit – there is no guarantee. The commission that they collect may encourage them to be more liberal in interpreting the IRS rules, which could be a problem if the IRS ever decides to audit your claim.
Also, self-employed individuals cannot claim their own wages and PPP funds already received can affect the amount of ERC that you will qualify to receive.

While the program officially ended as of 12/31/2021, businesses have up to three years to apply for and receive this credit, which is basically the period for amending the business’s quarterly Form 941 returns.
Although, the ERC funds received are not taxable, it will require that the business tax returns are amended to reflect the reduction in payroll expense.

Moreover, your trusted tax professional is your best bet in determining whether you are eligible and qualify for the ERC or not!

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