Misconception about ERC

We know that the Employee Retention Credit has been the talk of the town. Today we will break down some common misconceptions about the ERC.

First, what is the Employee Retention Credit?

According to the Internal Revenue Service, The Employee Retention Credit (ERC) is a refundable tax credit for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to Dec. 31, 2021.

Misconception: All businesses are eligible for the Employee Retention Credit (ERC).

Reality: Only certain businesses, including those that experienced a significant decline in gross receipts or were fully or partially suspended due to COVID-19, are eligible for the ERC.

Misconception: Businesses can claim the ERC for all employees, regardless of their wages.

Reality: The ERC is only available for wages paid to employees who earn less than $10,000 per quarter.

Misconception: Businesses that received a Paycheck Protection Program (PPP) loan cannot claim the ERC.

Reality: While businesses that received a PPP loan cannot claim the ERC for the same wages used to calculate PPP loan forgiveness, they may be able to claim the ERC for other wages.

Misconception: The ERC is only available for businesses with a certain number of employees.

Reality: There is no employee limit for businesses to claim the ERC, although the credit amount may be limited based on the number of employees and the amount of wages paid.

Misconception: The ERC can only be claimed for wages paid in 2020.

Reality: The ERC is also available for wages paid in 2021, and businesses may be able to claim the credit for up to $50,000 per employee per year.

Misconception: Businesses must choose between claiming the ERC or claiming the Work Opportunity Tax Credit (WOTC).

Reality: Businesses can claim both the ERC and the WOTC for the same employee, as long as the requirements for both credits are met.

Misconception: Businesses can only claim the ERC for employees who were not working during the pandemic.

Reality: Businesses can claim the ERC for employees who were working during the pandemic, as long as they meet the eligibility requirements.

Want to learn more about the Employee Retention Credit?

Visit our partner website to find out if your business qualifies here: https://bit.ly/3zb8VFO