Next Act For The Employee Retention Credit (ERC)

With the rise of covid epidemic in 2019, several businesses suffered severe challenges worldwide. Whereas many companies were facing significant workflow disruptions and financial strains, it was becoming harder for them to retain their workforce. So many organizations had to lay off their employees and reduce their operations to ascertain minimum survival. 

Nevertheless, the federal government considered this matter and thus introduced the Employee Retention Credit scheme to aid pandemic-affected businesses. Hence, today, we will dive into the key aspects of this pandemic relief scheme, its current state, the next act regarding ERC requirements, and how it can be valuable for employers.

Understanding the Employee Retention Credit

As previously stated, ERC, or Employee Retention Credit, is a pandemic relief scheme introduced to help businesses retain their workforce despite financial crises. So this scheme helped employers by providing them with refundable credit against employment taxes paid by them. 

The condition to claim this credit was that a business must have faced a considerable decline in its gross receipt or been subjected to a suspension of its operations either fully or partially. 

The Eligibility Requirements to Claim ERC

Not every business can be eligible for this credit scheme, so a few ERC requirements make your business eligible. First, your business must show a decline in its gross receipts for a certain period. The second condition following the eligibility criteria is suspending a business's operation due to government orders. 

Additionally, if your business operations have significantly reduced due to the coronavirus pandemic, By meeting any of these conditions, your business will be eligible to claim ERC credit. Ensure you carefully review and evaluate your ERC requirements for qualifying for the credit. If you are still trying to figure it out, we suggest you contact tax professionals by making an ERC phone call. 

How Do You Claim the ERC Credit?

So once you have figured out the eligibility criteria and if your business qualifies for the ERC credit, you need to learn how to claim it. Claiming ERC credit can provide your business with much-needed financial relief. So let's determine the steps in claiming ERC credit for your affected business.

1: Review the guidelines

Familiarize yourself with the official guidelines and instructions the Internal Revenue Service (IRS) provided regarding the ERC. This will help ensure you understand the requirements and procedures for claiming the credit.

2: Gather necessary documentation

Collect all the relevant documentation to support your ERC claim. This may include records of revenue, payroll data, and other documents as specified by the IRS. Accurate record-keeping is essential to substantiate your claim.

3: Complete the necessary forms

Fill out the required forms to claim the ERC. Typically, businesses must complete Form 941, Employer's Quarterly Federal Tax Return, or Form 7200, Advance Payment of Employer Credits Due to COVID-19.

4: File for the credit

Include the ERC on your employment tax return or use Form 7200 to request an advance credit payment if eligible. Ensure the information included is accurate and complete to ensure your claim runs smoothly.

5: Keep track of deadlines

Be aware of the deadlines for filing and receiving refunds related to the ERC. Timely submission of your claim is crucial to maximize the benefits of the credit.

6: Next Act for the ERC

As the pandemic continues to evolve, it's important to stay updated on the status of the ERC. Currently, the ERC has already expired on December 31, 2021. However, considering the ongoing economic challenges businesses face, there is a possibility of extension or renewal of the credit. 

Therefore, it is advisable to closely monitor legislative developments and consult with tax professionals to ensure you don't miss out on any potential extensions or changes to the ERC.

7: Handling ERC Audits

It's crucial to be prepared if your business is selected for an ERC audit. Here are some key points to consider:

8: Understand the audit process

Familiarize yourself with the audit process and what to expect if your business is audited for claiming the ERC. This will help you navigate through the audit more effectively.

9: Prepare necessary documentation

Keep detailed records and maintain proper documentation to support your ERC claim. Having organized and accurate records will greatly assist you during an audit.

10: Seek professional guidance

Consider working with a tax professional experienced in ERC audits. They can provide valuable guidance and assist you in preparing for the audit, ensuring compliance with relevant regulations.

11: Avoid common audit issues

Stay informed about common audit issues related to the ERC and take proactive steps to avoid them. This includes proper documentation, accurate calculations, and adherence to eligibility requirements.

Conclusion

The Employee Retention Credit has been a lifeline for many businesses during the challenging times brought about by the COVID-19 pandemic. It has provided financial support, allowing employers to retain employees and navigate economic uncertainties. 

So, while the ERC's future remains uncertain, businesses must understand the eligibility criteria, ERC requirements, and potential audit implications. By staying informed and seeking professional advice, businesses can maximize the benefits of ERC credit and secure their financial stability in the face of adversity.