Employee Retention Credit (ERC)
Up to $26,000 per W2 employee
What is the ERC tax credit for small and medium businesses?
It's a refundable payroll tax credit paid by the IRS. Congress introduced this program to reward companies for each W-2 employee kept on payroll during the height of the Covid-19 pandemic. Small and medium businesses will greatly benefit from this program.
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 for Q1 through Q3 of 2021. That’s a total refund of up to $26,000 per employee kept on your payroll during that period.
The Employee Retention Tax Credit (ERC) may be available to your business if it was negatively impacted by Covid-19.
Qualification requirement #1
Your business must be a "small business"
Any employer that operates a trade, business, or tax-exempt organization (and having at least 2 full-time employees not including ownership)
Qualification requirement #2
Your business was impacted by Covid-19
You experienced a significant decline in gross receipts in 2020 or 2021 (as compared to 2019) OR had operations that were affected by government orders resulting in limitations of commerce, travel, or meetings, such as full or partial shutdowns, disruptions to your supply chain, reduced operating hours, and reduced goods and service offerings to customers.
Unfortunately, the availability of a large amount of Employee Retention Credit funding by the federal government has open up the door to ERC scams. The types of ERC scams to watch out for are typically:
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upfront fee to have a phone consultation (our method is free)
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upfront fee to have your estimated ERC tax credit calculation (our method is free)
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upfront fee to formally apply for your ERC tax credit (our method is free)
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filing for the maximum ERC claim when this is not justified from the facts (our application process is strictly controlled for quality and accuracy to calculate the legally allowed ERC tax credit and no more)
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not providing any kind of support in case of IRS audit (our recommended provider will stand behind its filings due to 100% compliance mindset from the beginning)
The ERC tax credit can be quite valuable to a business, but no kind of scam ERC application process is worth the headaches and stress it will bring. You want to get set up with the right company to perform this important work correctly without any Employee Retention Credit fraud. You want to find a long-standing company that has not recently started to do only ERC claims. You can start the process with such a reputable at ERCStreet.
How much is the ERC tax credit worth to a business?
The rules for 2020 differ from 2021:
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In 2020, businesses that employed less than 100 full-time employees in 2019 can claim up to $5,000 per employee for the calendar year.
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In 2021, that amount was increased to a maximum of $21,000 per employee for businesses that employed less than 500 full-time employees in 2019.
The ERC tax credit is complicated with many moving parts when it comes to calculating the value to a specific company, and the IRS follows strict regulations to determine who can qualify. We recommend a professional, specialized expert to help you navigate this refund claim process (and do almost all of the work on your behalf).
Determining the proper amount of a refund is a complex accounting process (even many tax/CPA professionals may find the ERC program quite difficult to navigate). These are based on many factors including qualifying quarters, number of employees, hours worked, wages paid and if applicable, PPP loans, group health premiums and participation in other government programs to name a few. We recommend using accounting experts that meet 100% compliance for IRS rules and processes and deliver an accurate ERC tax credit amount. They will evaluate whether you qualify and prepare the necessary documentation to support your ERC claim.
Please see ERCstreet.com for more information and to connect with experts for a introductory consultation on this process.