The Employee Retention Tax Credit (ERC): Your Questions Answered

| September 14, 2023

The Employee Retention Tax Credit (ERC) is for Business Owners who had their revenue partially or greatly impaired during COVID shutdowns in 2020 and 2021.

Here are 3 things to know:

  1. Establish your ERC claim. Many eligible SMB owners still haven’t claimed ERC tax credits often assuming that their disruptions were not significant enough to justify getting Employee Retention Tax Credits. One oil distributor was surprised to know that despite having record profits, he was eligible for $750,000 in tax credits based on other criteria used to file his claim.
  2. Maximize your ERC claim. Are you in a PEO? If so you might be one of many PEO clients who was shorted on the money that the PEO was supposed to have passed along to their member companies.
  3. Document your ERC claim. It’s not enough to qualify; you must have your ERC claim documented thoroughly in the event of an audit.  It’s best to use an experienced tax credit firm, without any claims clawed back from the IRS.

Your Questions Answered

Q: What is the Employee Retention Credit (ERC)?

The Employee Retention Credit (ERC) is a CARES ACT incentive that gives special funds to eligible businesses that keep some or most of their employees on payroll.

Q: How much money can I get back from the Employee Retention Credit (ERC)?

The Employee Retention Credit (ERC) provides business owners up to

  • $5,000 per full-time employee retained between Oct 1, 2020 and De 31, 2020.
  • $21,000 per full-time employee retained between Jan 1, 2021 and Dec 31, 2021.
  • $26,000 Maximum Credit per Employee

Example: Employer with 20 employees could get over $600,000+

Q: How do I qualify for the Employee Retention Credit (ERC)?

There are many ways to qualify. Unfortunately, companies that could qualify fail to pursue or maximize the ERC money owed to them. Two of the many ways to qualify are:

  1. Have a significant disruption in supply chain.
  2. Have a 20% reduction in gross receipts in 2021 compared to 2019.

Q: Can I become eligible if I got a PPP loan?

Companies that received PPP loans can also be eligible for ERC money. The amount of your PPP loan will be deducted from the amount of your ERC funds if you are eligible.

Q: Do Not-for-profits qualify?

Yes, absolutely!

Q: Will the IRS audit my taxes if I get money with the Employee Retention Credit?

Probably. The IRS may audit every business that files for the Employee Retention Credit (ERC). It is critical you use the expertise of specialists who are familiar with the process to ensure your audit file is bullet-proof. You want to maximize your funds in the smartest, most prudent way.

In summary, the Employee Retention Credit (ERC) is a significant financial relief option for businesses facing challenges during the COVID-19 pandemic. It's a golden opportunity that many eligible SMB owners may not be fully utilizing due to misconceptions or lack of awareness. It's essential to understand your eligibility, maximize your claim, and document thoroughly to guard against any audit complications. If you have been impacted by supply chain disruptions or experienced a reduction in gross receipts, explore this avenue and potentially unlock significant tax credits for your business. Don't leave money on the table—ensure you're maximizing your ERC benefit today.

About The Author

Kirk Conole

Kirk Conole serves as the Chief Operating Officer overseeing client relationships and business development activities for the company. Before joining DCI, Kirk was the principal of Independent Energy Services, providing utility rate and tariff analysis along with economic analysis for energy projects such as back-up generation, co-generation, solar energy and energy efficiency. Kirk’s deep expertise in the area of Energy Consumption and Strategic Use allows him to provide utility rate and tariff analysis and cost savings for DCI’s clients. In addition, Kirk oversees the marketing of the firm’s CORE and Tax Solutions to current and prospective clients. Kirk received his B.S. in Electrical Engineering from San Diego State University.