5 Misconceptions About Qualifying for the ERC – Myths to Debunk About the Tax Credit

February 17, 2023

If you’re a business owner, you may be at least vaguely aware of the Employee Retention Credit, also known as the ERC or ERTC. It is a fully refundable payroll tax credit meant to assist businesses that kept people on staff during the height of the COVID-19 pandemic. But there are a number of misconceptions about the credit, and enough ERC myths floating around that we wanted to take the time to break some of them down.

If you continued to employ W2 staff at your business in the midst of the pandemic, you may qualify for this credit and could receive thousands of dollars for each employee. Let’s take a look at some of the most common ERC myths and misconceptions associated with qualifying for the credit:

– Every business gets $26,000 per employee

While every business owner can get up to $26,000 per employee, that is the maximum amount. The maximum is set at $26,000 per employee if all eligibility requirements are met. One of the best ways to determine exactly how much you can get per staff member is by getting a qualified team involved to help with your ERC application!

– My business got a PPP loan, so I can’t qualify for the ERC

Although there are some restrictions, in many cases, you can claim PPP and ERC together. It’s important to know which dollars are included as eligible wages and which are not as a result of a PPP loan already being calculated into the equation – which is another reason to get a skilled professional involved like the ones at our firm who can help you with the application.

– My business never shut down, so it’s not eligible for the ERC

Your business didn’t need to totally shut down for you to qualify to apply for the ERC now. IRS Notice 2021-20 notes that to determine eligibility, you need, “Documentation to show how the employer determined it was an eligible employer that paid qualified wages,” and includes, “Whether a governmental order had more than a nominal effect on its business operations,” according to Bloomberg Tax. Figuring out that “more than nominal” impact can also be the work of someone skilled in ERC applications, such as our team.

– The ERC application deadline has already passed

While there is limited time to apply for the ERC, the deadline hasn’t technically passed for businesses to take a look at past quarterly payroll tax filings to determine eligibility. For all quarters in 2020, the deadline to apply for the ERC is April 15, 2024, and for all quarters in 2021, the deadline is April 15, 2025. 

– Charities can’t apply for the ERC

Although not every organization is eligible for the ERC, a non-profit employer is eligible under certain conditions. Churches and other charities may qualify, but having someone from Phillips Law Group help determine if yours does might be your best bet.

Contact us to see how we can help you and your business retroactively claim the ERC in 2023! There is still time to find out if you qualify, and our team is happy to help you and your business get the highest potential tax credit refund.