September 7, 2023
The Employee Retention Tax Credit (ERC) has emerged as a valuable resource for businesses and organizations during times of economic uncertainty, such as the COVID-19 pandemic. Designed to help employers who retained their employees during the pandemic, the ERC has been a lifeline for many struggling businesses. However, despite its benefits, several misconceptions surround the process of filing for this credit. Continue reading, as we debunk some of the common misconceptions surrounding the Employee Retention Credit filing.
Misconception: The IRS is shutting down the ERC program by imposing a moratorium on ERC processing
The IRS has not abolished the ERC, nor has it changed the eligibility requirements. The moratorium is simply a temporary pause on processing new claims. IRS will continue to review and payout claims that have been filed during the processing moratorium, however it will take longer to process them because it is applying heightened scrutiny to all current claims. Employers that haven’t filed yet, may still do so. There is no moratorium on filing.
Misconception: Only Corporations Qualify
One common misconception is that the ERC is exclusively for large corporations. In reality, for-profit businesses and not-for-profit organizations of under 500 employees can qualify for this credit. While the credit was initially structured to benefit employers, changes in legislation extended the ERC to include certain self-employed individuals (restaurant owners, for example) who experienced a significant reduction in their trade or business due to COVID-19. These individuals can also explore the credit's potential benefits.
Misconception: Taking PPP Loans Excludes You
The Paycheck Protection Program (PPP) provided loans to businesses to maintain their payroll during the pandemic. Some business owners assume that if they received PPP loans, they're ineligible for the ERC. However, changes in legislation have made it possible for businesses that received PPP loans to also claim the Employee Retention Credit. Double-dipping (claiming the same expenses for both PPP forgiveness and ERC) is not allowed, but businesses can benefit from both programs.
Misconception: The ERC Credit is not taxable.
While the tax credit is not a loan and does not need to be paid back, any funds received would be considered taxable and requires amending federal returns.
Misconception: The ERC Isn't Worth the Effort
Some business owners underestimate the potential value of the Employee Retention Credit and assume that the effort required for filing isn't worth the benefit. In reality, the ERC can provide a substantial financial boost for businesses struggling to stay afloat. While the process can be complicated, with the assistance of knowledgeable accountants or tax professionals, the process can be much smoother. Many businesses have successfully claimed the credit by seeking professional guidance to ensure accurate calculations and proper documentation.
Don’t let misconceptions surrounding Employee Retention Credit filing prevent your business from accessing much-needed financial support during challenging times. It's essential for business owners to seek accurate information and professional advice to make informed decisions about whether they qualify for and should pursue the ERC. With the knowledge and guidance of JCA Specialist, businesses can maximize their chances of successfully claiming this credit and alleviating some of the financial strain caused by economic uncertainty. To determine if your business is eligible, contact JCA Specialist today at (800) 335-1552 or https://www.jcaspecialist.com.