What is the ERC, Why Should You Care About It, and How Does it Work?

what is the ERC refund

Upon learning about the ERC refund credit, business owners naturally want to find out more. After all, it could be worth up to $26,000 per employee – a potential windfall! Thus, it is understandable that they would have questions such as: What is the ERC refund credit? Am I eligible for it? And what are the next steps?

What Is ERC

Employee Retention Credit (ERC) is a government stimulus aid program that is designed to help those businesses that were able to retain their employees during the Covid-19 pandemic.  It was established by the CARES Act in 2020 and since then has had multiple adaptations to it. You can find more details about it on the IRS site.

Do you Qualify?

If you owned a business and kept employees on board during the 2020-2021 pandemic period, there is a high likelihood that you qualify for Employee Retention Credits (ERC). Ninety percent of retail businesses meet the ERC requirements, which include such measures as additional sanitization, reduced hours, social distancing protocols and/or temporary closure. Even if your business had to shut down for only a brief time frame while still maintaining staff members on payroll, it would be eligible for ERC.

How to File Your ERC

Filing for your ERC credit can be done in several ways. You can choose to do it yourself, pay a tax preparer or CPA upfront, or partner with an ERC specialty company that has knowledgeable CPAs on staff and offers services on a contingency basis. Let us take a closer look at each of these options!.

Do It Yourself

One option would be to do the filing yourself. About one percent of business owners are qualified to do this. Those type of business owners are more likely to own a tax practice and or law firm.

Since you most likely do not have time to also run a tax practice or law firm this is probably not your best option. Even if you knew how, it would take away too much time from managing your facility, and most of all, misdirect your efforts of helping your clients.

Tax Preparer or CPA

When it comes to filing for the Employee Retention Credit (ERC), having an expert in the field is essential. A tax preparer or CPA may understand the tax regulations, but they might not have experience with successfully submitting ERC filings.

Moreover, there have been several changes to CARES Act since 2020 and most tax professionals are not up-to-date on them; businesses do not need to have lost money during the pandemic years to qualify, businesses that had to close can still get ERC funds, and even if a business has received PPP loans they are still eligible for ERC money.

Furthermore, many business owners receive incorrect advice from unqualified sources which prevents them from getting thousands of dollars that they could be entitled too. Unlike other forms of aid such as PPP loans where funds run out after a certain number of businesses receive them, this grant does not deplete and is available for any qualifying business – making it important to ensure you’re receiving accurate information when applying. 

Also, a tax preparer or CPA might require an upfront payment for their time, regardless if your ERC filing gets funded. It is extremely unlikely that any tax preparer will go through the many hours it takes to prepare a file for submission to the IRS without some sort of upfront payment.

An ERC Specialty Company

Working with an experienced ERC specialist is a great option for business owners. Not only have they completed thousands of these filings, but they are also up to date on all the current regulations regarding the CARES ACT. This law was established in 2020 and has had multiple changes since then that can be difficult to keep track of – so having someone who understands how to apply them effectively is invaluable.

When it comes to finding a trustworthy company, look out for those that ask you for upfront payments without other options. Many businesses have been struggling financially due to this pandemic, so not having another financial burden placed upon them is definitely something worth considering when selecting your provider.

Conclusion

After considering your options, you may have come to the conclusion that an ERC specialty company is the most sensible choice. Doing it yourself is not recommended and a professional tax preparer may not be suitable either. To compare an ERC filing company with a tax professional, think of them in terms of surgeons: both are great doctors, but specialize in different areas. An ERC specialist will guarantee you get all the money your business qualifies for without any upfront payment – the perfect solution!

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