Employee Retention Tax Credit

As a business owner, you are likely getting bombarded with solicitations about the government program Employee Retention Tax Credit (ERTC).  This blog is designed to provide you with facts and resources about the program so you can make an informed decision. 

First, let us give you some background.  The employee retention tax credit started back during the pandemic. It was originally launched in 2020 and then it was revised in 2021. The program is a refundable tax credit that rewards business owners for keeping their employees employed during the pandemic.

If you were impacted by COVID, either your business was partially or fully shut down during 2020 or 2021, or if you suffered a revenue loss in a quarter in 2020 or a quarter in 2021 compared to 2019, same quarter, you might be eligible for the credit. 

For 2020, it’s a $5,000 credit per employee. In 2021, it’s up to a $7,000 credit per employee per quarter. Because the program existed for three quarters in 2021 at $7,000 a quarter per employee, plus $5,000 from 2020, businesses could be getting up to $26,000 per employee under this employee retention tax credit.  Businesses have until as late as 2025 to amend payroll tax returns to access ERTC.

Now, it might not be as big as you think it is. A lot of people (and solicitations) are saying it is a $26,000 per employee tax credit. Well, your business probably wasn’t affected for all that time during 2020 and then all three quarters in 2021. Also, if you got a paycheck protection program (PPP) loan, any money that you were using in the calculation, any payroll dollars, you can’t use those same payroll dollars to apply for the employee retention tax credit. Many businesses sort of used up that opportunity because of their PPP loan and they don’t have any money left to access the employee retention tax credit.

Don’t buy into the emails you’re probably getting from unknown firms saying that you could be getting millions in credits or $26,000 per employee. A lot of them are scams and the problem is becoming so big that in October the IRS issued a warning to small businesses saying, be aware of these ERTC scams because a lot of those firms are not credible or not reputable. It doesn’t mean that you can’t be eligible for the employee retention tax credit and you can’t get some help, but you need to work with a legitimate firm to guide you through the process. 

Many business owners are looking for guidance on where to start or how to apply.  If your business uses a payroll service like Paychex or ADP, they usually offer their own separate services to test and to check if you’re eligible for the employee retention tax credit. If you’re already a customer of those services, they’ve got your data which makes the process easier.  They also know the rules well and they’re credible and legitimate.  Another good resource is your CPA or Accountant if they offer the service.  If you are seeking additional assistance, Coast Funding can provide a referral to preferred partners that can help walk you through the process.  For more information, click here: