Tax Credits

Employee Retention Credit (ERC) Deadlines (August 2023)

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In the fast-paced world of business, timing is everything. And when it comes to the Employee Retention Credit (ERC), a lifeline for businesses during these challenging times, meeting the deadline is of utmost importance.

The ERC, a provision introduced under the CARES Act, is a game-changer for employers. By offering substantial tax credits, it rewards businesses who retained their valuable employees during COVID, ensuring stability and resilience. Unlike the Paycheck Protection Program (PPP), which provides forgivable loans, the ERC reduces payroll taxes, providing immediate financial relief to a large number of businesses affected by the pandemic.

Missing the ERC deadline means leaving money on the table and forfeiting potential relief. It’s a race against time to optimize eligibility and maximize benefits. Below, we delve into the benefits of the ERC, explore why meeting the deadline is crucial, and uncover strategies to make the most of this invaluable opportunity for financial support.

What is the Employee Retention Credit?

The ERC is a refundable tax credit specifically crafted to bolster employers who demonstrated resilience by continuing to pay their employees during periods of shutdown or faced significant declines in gross receipts between March 13, 2020, and December 31, 2021, as stated by the IRS.

Unlike the forgivable loans provided by the Paycheck Protection Program (PPP), the ERC takes a different approach, alleviating the burden on employers by reducing their payroll taxes. By harnessing this credit, businesses not only receive indispensable financial assistance but also retain their invaluable workforce.

Initially introduced in the CARES Act relief package, the ERC has undergone substantial amendments and extensions through subsequent legislation, including the Taxpayer Certainty and Disaster Relief Act, the American Rescue Plan Act, and the Infrastructure Investment and Jobs Act. These updates have broadened the ERC’s eligibility criteria and extended its duration, opening doors for more businesses to reap its benefits.

When is the deadline for the ERC application?

It’s important to note that the Employee Retention Credit (ERC) is not available for tax years 2023 and beyond. However, if you haven’t yet taken advantage of this credit, there’s still an opportunity to retroactively apply.

In 2020, businesses could receive a credit of up to $5,000 per employee. In 2021, the potential credit was increased to $7,000 per employee per quarter. These amounts reflect the substantial support available through the ERC.

Deadlines for ERC Claims

For all quarters in 2020 (Q1-4):

  • ERC claims must be filed by April 15, 2024.

For all quarters in 2021 (Q1-4):

  • ERC claims must be filed by April 15, 2025.

To get ahead of the deadlines and maximize your ERC tax credit, we recommend using Omega Tax Credits. They are our top-rated ERC provider and offer a free 10 minute consultation call to discuss your eligibility in more detail. Omega have a proven track record in helping business owners reliably claim their COVID support funds.

Alternatively, BottomLine Concepts are an experienced ERC provider, trusted by 30% of Fortune 1000 companies. They are also ideal for small and medium-sized businesses looking to claim their ERC tax rebates.

Audit Assessment Period for ERC Claims

The audit assessment periods for ERC claims vary based on the year and quarter.

For all quarters in 2020 (Q1-4):

  • The three-year statute of limitations ends on April 15, 2024.

For the first two quarters of 2021 (Q1-2):

  • The three-year statute of limitations ends on April 15, 2025.

For the last two quarters of 2021 (Q3-4):

  • The IRS has extended the statute of limitations by an additional two years.
  • This extends the period that the IRS can audit ERC claims for the third and fourth quarters of 2021 through April 15, 2027.

When it comes to filing for the Employee Retention Credit (ERC), it’s essential to understand the deadlines and the importance of timely submission. The filing window for the ERC closes once for each year, conveniently aligning with your business’ regular income tax deadline.

While there is still sufficient time to claim the ERC, it’s important not to delay the filing process. The IRS processes claims in the order they are received, meaning an early submission increases the chances of expeditious processing.

Does my business qualify for the ERC?

The Internal Revenue Service (IRS) outlines two primary paths to qualify for the ERC:

  1. Full or Partial Suspension of Operations:
    • Your business experienced limitations on commerce, travel, or group meetings due to COVID-19.
    • You received orders from an appropriate governmental authority in 2020 or 2021, resulting in a full or partial suspension of operations.
  2. Significant Decline in Gross Receipts:
    • Your business faced a substantial decline in gross receipts during 2020 or the first three quarters of 2021.
    • Specifically, you qualify if your gross receipts for a specific quarter were at least 50% less than the same quarter in 2019 (for 2020 quarters) or 20% less than the same quarter in 2019 (for 2021 quarters).

Additionally, for the third or fourth quarters of 2021, you may qualify as a recovery startup business. It’s important to note that there are limitations associated with the ERC. Wages reported as payroll costs for PPP loan forgiveness or certain other tax credits cannot be claimed for the ERC in any tax period.

If you are uncertain about your eligibility, consulting the latest IRS policies is advisable. This will help determine if your revenue drop meets the significant decline threshold required for qualification. You can also read more about eligibility for the ERC in our Employee Retention Credit Guide & Examples article.

Summary

The Employee Retention Credit (ERC) provides businesses with a valuable opportunity for financial relief, but it’s important to meet the filing deadlines to take full advantage of this credit. To ensure compliance and eligibility for the ERC, businesses must adhere to the following filing deadlines:

Filing Deadlines for ERC Claims

  • For all quarters in 2020 (Q1-4):
    • ERC claims must be filed by April 15, 2024.
  • For all quarters in 2021 (Q1-4):
    • ERC claims must be filed by April 15, 2025.

By meeting these deadlines, businesses can secure their eligibility for the ERC and maximize the potential benefits. It’s crucial to mark these dates on your calendar and take proactive steps to file for the ERC within the specified timeframe. Don’t miss out on the opportunity to receive the financial support your business deserves.